<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO _______________
Commission file number: 333-59889; 333-59903
PARK `N VIEW, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 65-0612435
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11711 N.W. 39TH STREET, CORAL SPRINGS, FL 33065
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (954) 745-7800
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
The number of shares outstanding of the registrant's common stock, par
value $0.001 per share, as of May 11, 1999 was 4,318,314.
<PAGE> 2
PARK `N VIEW, INC.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited) 3
Balance Sheets as of June 30, 1998 and March 31, 1999 (Unaudited) 3
Statements of Operations for the three and nine months ended March 31,
1998 and 1999 (Unaudited) 4
Statements of Cash Flows for the nine months ended
March 31, 1998 and 1999 (Unaudited) 5
Notes to Condensed Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 3. Defaults Upon Senior Securities 19
Item 4. Submission of Matters to a Vote of Securities Holders 19
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
Signatures
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
PARK 'N VIEW, INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................................................ $ 19,810,656 $ 2,942,942
Short-term investments ................................................... 32,039,916 18,214,371
Restricted investments ................................................... 9,750,000 9,750,000
Accounts receivable, net of allowance for doubtful accounts of
$5,400 and $10,000 at June 30, 1998 and March 31, 1999, respectively... 184,180 194,909
Inventory ................................................................ 362,738 394,906
Prepaid expenses and other ............................................... 100,877 375,122
------------ ------------
Total current assets .............................................. 62,248,367 31,872,250
Property and Equipment, Net (Note 2) ....................................... 18,448,601 31,253,324
Restricted Investments ..................................................... 9,513,000 5,487,685
Deferred Financing Costs ................................................... 3,744,366 3,850,246
Other Assets ............................................................... 623,793 784,106
------------ ------------
Total ............................................................. $ 94,578,127 $ 73,247,611
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable ......................................................... $ 2,067,113 $ 1,500,247
Accrued expenses ......................................................... 1,550,888 1,834,772
Accrued interest on senior notes ......................................... 920,831 3,683,331
Deferred revenue ......................................................... 205,853 278,544
Current portion of capital lease obligations ............................. 330,814 333,143
Current portion of long-term debt ........................................ 33,727 32,710
------------ ------------
Total current liabilities ......................................... 5,109,226 7,662,747
------------ ------------
Obligations Under Capital Leases ........................................... 185,174 328,163
------------ ------------
Long-Term Debt ............................................................. 70,419,566 70,734,162
------------ ------------
Commitments and Contingencies (Note 3)
Series A Redeemable Preferred Stock and Accrued Dividends -- Par
value $.01 per share; 627,630 shares authorized; 388,075 shares
issued and outstanding ($10.00 per share liquidation
preference, including accrued dividends of $542,538 and
$757,844 as of June 30, 1998 and March 31, 1999, respectively) ........... 4,301,345 4,525,272
------------ ------------
Series B Redeemable Convertible Preferred Stock and Accrued
Dividends -- Par value $.01 per share; 1,372,370 shares
authorized, issued and outstanding ($10.93 per share
liquidation preference, including accrued dividends of
$1,712,083 and $2,499,583 as of June 30, 1998 and March 31,
1999, respectively) ...................................................... 16,316,432 17,131,970
------------ ------------
Series C Redeemable Convertible Preferred Stock and Accrued Dividends --
Par value $.01 per share; 3,750,000 shares authorized, 2,328,543 and
2,351,543 issued and outstanding as of June 30, 1998 and
March 31, 1999, respectively ($8.00 per share liquidation preference,
including accrued dividends of $1,115,631 and $2,093,616 as of
June 30, 1998 and March 31, 1999, respectively)........................... 18,516,147 19,795,280
------------ ------------
Common Stockholders' Deficit:
Common stock -- par value $.001 per share; 12,000,000 shares
authorized at June 30, 1998 and March 31, 1999; 4,318,182 shares
issued and outstanding................................................. 4,318 4,318
Additional paid-in capital ............................................... 1,465,923 --
Accumulated deficit ...................................................... (21,740,004) (46,934,301)
------------ ------------
Total common stockholders' deficit ................................ (20,269,763) (46,929,983)
------------ ------------
Total ............................................................. $ 94,578,127 $ 73,247,611
============ ============
</TABLE>
See notes to condensed financial statements.
<PAGE> 4
PARK 'N VIEW, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1998 1999 1998 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
Service revenue ........................ $ 840,710 $ 2,213,271 $ 1,973,687 $ 5,833,412
Equipment sales ........................ 19,013 65,956 97,158 139,624
Other .................................. 8,314 8,377 35,610 23,767
------------ ------------ ------------ ------------
Total revenues ................. 868,037 2,287,604 2,106,455 5,996,803
------------ ------------ ------------ ------------
Cost of Revenues:
Service cost ........................... 933,687 2,713,624 2,113,783 6,527,381
Service depreciation ................... 512,311 1,259,697 1,211,849 3,130,303
Equipment cost ......................... 296,251 434,064 771,606 1,380,776
Advertising ............................ 12,651 27,510 31,497 42,234
------------ ------------ ------------ ------------
Total cost of revenues ......... 1,754,900 4,434,895 4,128,735 11,080,694
------------ ------------ ------------ ------------
Gross margin ............................. (886,863) (2,147,291) (2,022,280) (5,083,891)
Selling, general and
administrative expenses ................ 2,558,427 4,837,833 6,471,565 13,779,231
------------ ------------ ------------ ------------
Loss from operations ..................... (3,445,290) (6,985,124) (8,493,845) (18,863,122)
Interest expense ......................... 3,014 2,530,756 23,949 7,529,617
Interest income and other ................ (110,999) (313,638) (397,442) (1,617,117)
------------ ------------ ------------ ------------
Net loss ....................... (3,337,305) (9,202,242) (8,120,352) (24,775,622)
Preferred stock dividends
and amortization of
preferred stock issuance
costs ........................ (728,082) (728, 513) (1,979,842) (2,134,600)
------------ ------------ ------------ ------------
Net loss attributable to
common stockholders .......... $ (4,065,387) $ (9,930,755) $(10,100,194) $(26,910,222)
------------ ------------ ------------ ------------
Net loss per share (basic and
diluted) ..................... $ (0.94) $ (2.30) $ (2.34) $ (6.23)
------------ ------------ ------------ ------------
</TABLE>
See notes to condensed financial statements.
<PAGE> 5
PARK 'N VIEW, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
----------------------------------
1998 1999
------------ ------------
<S> <C> <C>
Operating Activities:
Net loss .................................................... $ (8,120,352) $(24,775,622)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization ............................. 1,286,143 3,941,543
Stock option compensation expense ......................... 250,000
Changes in assets and liabilities:
Accounts receivable ..................................... (148,603) (10,729)
Inventory ............................................... (220,368) (32,169)
Prepaid expenses and other .............................. 16,730 (90,255)
Other assets ............................................ (163,753) (233,210)
Accounts payable ........................................ 103,008 (566,865)
Accrued expenses ........................................ (344,791) 283,885
Accrued interest on senior notes ........................ 2,762,500
Deferred revenue ........................................ 158,952 72,691
------------ ------------
Net cash used in operating activities ................ (7,433,034) (18,398,231)
------------ ------------
Investing Activities:
Decrease in short-term investments ........................ 13,825,545
Decrease in restricted investments ........................ 4,025,315
Purchases of property and equipment ....................... (9,822,272) (15,609,711)
------------ ------------
Net cash (used in) provided by investing activities... (9,822,272) 2,241,149
------------ ------------
Financing Activities:
Proceeds from issuance of common and preferred
stock .................................................... 18,628,344
Payment of stock and debt issuance costs and other .......... (1,081,835) (361,976)
Payment of obligation under capital lease ................... (211,344) (323,606)
Notes payable ............................................... (20,802) (25,050)
------------ ------------
Net cash provided by (used in) financing
activities ........................................ 17,314,363 (710,632)
------------ ------------
Net Increase (Decrease)In Cash And Cash
Equivalents ................................................. 59,057 (16,867,714)
------------ ------------
Cash And Cash Equivalents, Beginning Of Period ................ 4,717,394 19,810,656
------------ ------------
Cash And Cash Equivalents, End Of Period ...................... $ 4,776,451 $ 2,942,942
============ ============
Supplemental Cash Flow Information:
Interest paid ............................................... $ 29,460 $ 4,617,601
============ ============
Non-Cash Financing And Investing Activities:
Capital lease obligations relating to
acquisition of property and equipment ..................... $ 208,518 $ 468,927
============ ============
Issuance of common stock warrants ........................... $ 538,999
============
Issuance of Series C Preferred Stock ........................ $ 184,000
============
</TABLE>
See notes to condensed financial statements.
<PAGE> 6
PARK 'N VIEW, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The interim balance sheet as of March 31, 1999, the interim statements
of operations for the three-month and nine-month periods ended March 31, 1998
and 1999 and the interim statement of cash flows for the nine-month periods
ended March 31, 1998 and 1999 are unaudited. In the opinion of management, all
adjustments necessary for a fair presentation of such financial statements have
been included. All adjustments made were of a normal recurring nature. Certain
information and footnote disclosure normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. Park 'N View, Inc. (the "Company") believes that
the disclosures included are adequate and provide a fair presentation of interim
period results. Interim financial statements are not necessarily indicative of
financial position or operating results to be expected for the entire year.
These interim financial statements should be read in conjunction with the
audited financial statements of the Company and the notes thereto for the year
ended June 30, 1998.
2. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
June 30, 1998 March 31, 1999
------------- --------------
<S> <C> <C>
Site equipment and improvements...................... $16,484,956 $31,662,876
Construction equipment............................... 150,059 150,059
Computer equipment................................... 352,643 756,365
Vehicles............................................. 451,382 980,014
Furniture, fixtures and other equipment 65,869 65,868
----------- -----------
Subtotal........................................ 17,504,909 33,615,182
Less accumulated depreciation........................ 2,630,706 5,904,624
----------- -----------
Subtotal........................................ 14,874,203 27,710,558
Component inventory.................................. 3,574,398 3,542,766
----------- -----------
Property and equipment, net.......................... $18,448,601 $31,253,324
=========== ===========
</TABLE>
Component inventory represents equipment that is awaiting installation
at a site. Upon installation the cost of the related equipment is transferred to
site equipment and improvements and depreciation commences once the site is
operational. Component inventory is temporarily staged at the Company's
warehouse until all equipment for a site is received, certain assembly
operations are complete and the site is ready to accept the equipment for
installation. The period of time that the component inventory is staged at the
Company's warehouse is approximately 45 days and the construction period at the
site is approximately 30 days. Accordingly the time period between the date of
acquisition of the component inventory and the completion date for the
installation at the site is approximately 75 days. Component inventory is
reclassified to site equipment upon completion of the site on a FIFO basis for
all components.
3. COMMITMENTS AND CONTINGENCIES
In July 1998, the Company entered into contracts with AT&T to lease T-1
lines and purchase long distance and local telephone service. The minimum lease
payments for the T-1 lines before discounts is approximately $5.1 million, $7.7
million and $7.7 million per year during the first, second, and third years of
the lease, respectively. The Company's minimum purchase commitment for the long
distance and local telephone service is $480,000 per year for a two year term.
In August 1998, the Company entered into an operating lease for a wide
area network. The annual minimum rental amount approximates $1.2 million for a
three year term. The leases become effective when the equipment is delivered and
installed. As of March 31, 1999, the routing equipment has been delivered and
installed and the operating leases have become effective.
In March 1999, the Company entered into an employment agreement with
Robert P. May (the "Employment Agreement"). If the Company terminates Mr. May's
employment without cause during the term of Mr. May's Employment Agreement, Mr.
May will receive six (6) months base salary and premium payments for the split
dollar insurance policy for six (6) months. If a change in
<PAGE> 7
control occurs and the Company terminates Mr. May's employment without cause
during the eighteen (18) month period commencing on the effective date of the
Change in Control, the Company will pay Mr. May eighteen (18) months base salary
and premium payments for the split dollar insurance policy for six (6) months,
as well as an amount equal to the bonus paid to Mr. May in the previous year. If
Mr. May does not execute a general release of the Company and its
representatives from liability relating to his employment or association with
the Company, then Mr. May only will be entitled to a severance payment of one
(1) month of his base salary upon termination.
In January 1999, the Company entered into a Telecom Service Agreement (the
"Telecom Service Agreement") with TA Operating Corporation ("TA"). The Company
believes that it will cost the Company approximately $6,000 per site to install
the prepaid phone card equipment required under the Telecom Service Agreement
and $8,000 per site for increased telephone switch capacity to accommodate
public access telephone service (coin and coinless pay stations) at each site.
Based on these cost estimates and the installation of such equipment at each of
the approximately 145 truckstops currently owned or operated by TA, the Company
would spend approximately $2,030,000 in the aggregate to install the necessary
equipment. If the Company does not install such equipment at each of the
approximately 145 truckstops or fails to meet the agreed buildout schedule, then
TA may terminate the Telecom Service Agreement.
A potential problem exists for all companies that rely on computers as
the year 2000 approaches. The "Year 2000" problem is the result of the past
practice in the computer industry of using two digits rather than four to
identify the applicable year. This practice could result in incorrect results
when computers perform arithmetic operations, comparisons or data field sorting
involving years later than 1999. The Company is in the process of conducting a
review of its computer systems to identify the systems that could be affected by
the "Year 2000" issue and is developing a plan to address the issue. The Company
will utilize both internal and, if needed, external resources to reprogram or
replace and test all of its software for Year 2000 compliance, and the Company
expects to complete the project during the second half of 1999. The Company has
a preliminary estimate of $200,000 as the maximum cost of evaluating, testing,
reprogramming, and modifying its software. The estimate is based on the belief
that no major problems will be encountered in becoming Year 2000 compliant.
Based on its preliminary internal review, the Company believes that the
Company-developed software is Year 2000 compliant. However, the Company plans to
do more extensive testing of the PNV Software during the current calendar year
which may require the use of independent consultants to assist in the Company's
evaluation to assure a correct assessment of cost and risk. In addition, the
Company relies on third party vendors which must also become Year 2000
compliant. The Company has a significant reliance on outside vendors such as
telephone companies, satellite system providers, electrical providers and the
wide area network supplier. These services are critical in the Company's ability
to generate revenue. The ability of third parties with which the Company
transacts business to adequately address their Year 2000 issues is outside of
the Company's control. The Company is planning to create a comprehensive list of
all internal and external software programs to assure that a full review of such
software is completed. However, if any necessary modifications to the PNV
Software are not completed in a timely manner or if the Company's vendors are
not Year 2000 compliant, the Year 2000 problem may have a material
adverse-impact on the operations of the Company. The Company has not made any
progress in assessing its non-information technology systems. These types of
systems are more difficult to assess and repair than information technology
systems and the Company may have to replace the non-information technology
systems that cannot be repaired. The Company will begin reviewing its
non-information technology systems in the second half of 1999. The Company
presently has no basis on which to estimate the costs of assessing and repairing
or replacing its non-information technology systems or to determine whether such
costs will have a material adverse effect on the Company's operations or
financial condition.
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Cautionary Statement Identifying Important Factors That Could Cause the
Company's Actual Results to Differ From Those
Projected in Forward Looking Statements
Pursuant to the "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995, readers of this report are advised that this
document contains both statements of historical facts and forward-looking
statements. Forward-looking statements are subject to certain risks and
uncertainties, which could cause actual results to differ materially from those
indicated by the forward looking statements. This report contains certain
forward-looking statements under the captions "Management's Discussion and
Analysis of Financial Condition and Results of Operations," and elsewhere,
including statements regarding, among other items, the Company's anticipated
strategies, expansion of the functionality and capacity of the PNV Network,
additional telecommunications and other services to be offered through the PNV
Network, cost savings, expenditures and cash requirements. Such forward-looking
statements involve known and unknown risks, uncertainties and other important
factors that could cause the actual results, performance or achievements of the
Company to differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
risks, uncertainties and other factors include, among others: uncertainties
inherent in proposed business strategies and development plans; future financial
performance, including availability, terms and deployment of capital; inability
to increase subscription sales or realize expected cost savings; market demand
for the Company's current and planned telecommunications and entertainment
services and products; technological developments; competitive developments in
the telecommunications, cable and long-haul trucking industry; availability of
qualified personnel; changes in, or the failure or inability to comply with,
government regulation, including, without limitation, regulations of the Federal
Communications Commission, and adverse outcomes from regulatory proceedings;
changes in the nature of key contractual relationships with truckstops and/or
fleet trucking companies; market acceptance of the pricing of the Company's
services and products; and other factors referenced in this report. See "Risk
Factors."
OVERVIEW
As of March 31, 1999, the PNV Network was available at 212 full-service
truckstops. This compares to 188 as of December 31, 1998 and 118 as of June 30,
1998 and 102 as of March 31, 1998. During March 1999, the Company had over
35,500 subscribers; this compares to approximately 33,000 during December 1998
and 25,000 subscribers during June 1998 and approximately 19,000 during March
1998.
During March 1999, the Company had approximately 21,500 monthly
subscribers and approximately 14,000 daily subscribers; during December 1998 the
Company had approximately 22,000 monthly subscribers and approximately 11,000
daily subscribers; during March 1998, the Company had approximately 11,700
monthly subscribers and approximately 7,300 daily subscribers. Of the Company's
monthly subscribers during March 1999, 13,594 were under the Company's Power
Plan Program and 3,148 were fleet trucking company subscriptions; during
December 1998, 13,600 were under the Company's Power Plan Program and 2,934 were
fleet trucking company subscribers; during March 1998, 5,400 were under the
Company's Power Plan Program, and 928 were fleet trucking company subscriptions.
The Company's revenues increased 164% for the quarter ended March 31,
1999 compared to the quarter ended March 31, 1998 and 15% compared to the
previous quarter ended December 31, 1998. Since October 1998, the Company has
experienced slower membership growth, slower buildup in revenue per subscriber,
and higher costs. As a result, the Company in January 1999 reduced capital
expenditures by slowing the buildout of the PNV Network from a planned 10 to 15
sites per month to 6 to 8 new sites per month to conserve cash and to allow for
continued emphasis on sales, marketing and the development of new services.
The Company believes that the slower membership growth resulted
principally from the lack of significant new contracts with fleet trucking
companies. The Company continues to market the PNV Network in an effort to
increase market acceptance and recognition of the benefits of the PNV Network by
truck drivers. In connection with the new marketing efforts, since March 1999,
the Company has offered a program pursuant to which fleet trucking companies
either would permit
<PAGE> 9
automatic payroll deductions as a means for the fleet's truck drivers to pay
for their subscriptions to the PNV Network or the fleet trucking company would
subsidize a portion of the subscription rate for their truck drivers.
The Company believes that the slower revenue per subscriber buildup is
due primarily to the relatively large number of daily subscribers as compared to
monthly subscribers and to the lower usage by truck drivers of long distance
telephone minutes offered by the Company.
The Company during the first quarter of fiscal year 2000 will become an
Internet Service Provider (ISP), which will allow the Company to offer access to
the Internet through the PNV Network. In conjunction with the Company becoming
an ISP, the Company will develop a web site and portal, which will provide
access to driver fleets, advertisers, manufacturers, and other business to
business applications in this vertical market. The Company believes that these
services will enhance the attractiveness of the PNV subscriptions, which the
Company believes will increase the ability to penetrate the fleet trucking
companies as well as attract other non subscription based revenue. Costs
associated with this development will be additional to the current expense
levels.
While the slowed buildout of the PNV Network will reduce the Company's
capital expenditures and will conserve cash, the Company nonetheless continues
to expect to incur a significant net loss and negative cash flow from operations
at least through the fiscal year ending June 30, 1999. As a result, the Company
will be required to raise additional capital to sustain these losses.
On January 27, 1999, the Company entered into a Telecom Service
Agreement with TA Operating Corporation. TA, itself or through its affiliates,
currently owns or operates (or has entered into franchise agreements with
certain entities entitling them to operate) approximately 145 full-service
truckstops. Pursuant to the Telecom Service Agreement, the Company has the right
to install the equipment to provide prepaid phone cards, fleet
telecommunications services, coin and coinless phones, fleet in-bound 800
calling, and internet access and data transmission at an initial three (3)
truckstops. Unless TA notifies the Company of the termination of the Telecom
Service Agreement within sixty (60) days after the installation of the equipment
at these initial sites, the Company will begin the installation of equipment at
TA's truckstops on a buildout schedule to be mutually agreed upon by the Company
and TA, which will provide for installation at ten (10) truckstops per month on
average. The Company has completed the installation of the equipment at the
three (3) truckstops and a sixty (60) day notification period ends May 27, 1999.
Unless TA notifies the Company of the termination of the Telecom Service
Agreement by May 27, 1999 or the Company fails to perform its obligations under
the Telecom Service Agreement, the Company will have the exclusive right to
provide these telecommunications services at TA's truckstops during the four (4)
year term of the Telecom Service Agreement. The Telecom Service Agreement will
give the Company the ability to capture revenue opportunities inside the truck
stop. This additional revenue is expected to begin in the Quarter ending June
30, 1999.
The Company believes that it will cost the Company approximately $6,000
per site to install the prepaid phone card equipment required under the Telecom
Service Agreement and $8,000 per site for increased telephone switch capacity to
accommodate public access telephone service (coin and coinless pay stations) at
each site. Based on these cost estimates and the installation of such equipment
at each of the approximately 145 truckstops currently owned or operated by TA,
the Company would spend approximately $2,030,000 in the aggregate to install the
necessary equipment. If the Company does not install such equipment at each of
the approximately 145 truckstops or fails to meet the agreed buildout schedule,
then TA may terminate the Telecom Service Agreement.
Employment Agreement with Robert P. May
The Company has entered into an employment agreement with Robert P. May
pursuant to which he was employed as the Company's Chief Executive Officer
effective March 1999. The Company may terminate Mr. May's employment pursuant to
this agreement at any time. Under this agreement, Mr. May's base annual
compensation is $275,000 and he is eligible for an incentive bonus. In addition,
the Company has agreed to pay certain specified expenses on Mr. May's behalf.
In connection with his employment, the Company sold to Mr. May 23,000
shares of the Company's Series C 7% Cumulative Convertible Preferred Stock at
$8.00 per share for an aggregate purchase price of $184,000. Of this purchase
price, $92,000 was paid in the form of a promissory note due in full at the end
of four years and $92,000 is payable in cash pursuant to his employment
agreement over an eight month period during his first year of employment.
Mr. May also received from the Company a nonqualified stock option to
purchase 567,083 shares of the Company's common stock (the "Option"), under the
Park 'N View, Inc. Stock Option Plan, having an exercise price no greater than
$5.00 per share. The Option vests at the rate of approximately 2.08% monthly,
but becomes exercisable in full upon a change in control of the
<PAGE> 10
Company (as defined in the Employment Agreement) and if Mr. May is employed with
the Company as of the first anniversary of the closing of an underwritten
initial public offering of the Company's Common Stock. The Company also agreed
that, in the event of certain sales of the Company's stock in an aggregate
amount up to $20,000,000 closed prior to February 29, 2000, the Company will
grant to Mr. May additional options to purchase shares of the Company's Common
Stock such that, immediately following any such grant of additional options, Mr.
May will hold options to purchase an aggregate of up to five percent of the
Common Stock (calculated on a fully diluted basis) outstanding after such sale.
If Mr. May's employment is terminated without cause he will receive six
months base salary and certain additional payments. If a change in control of
the Company occurs and Mr. May's employment is terminated without cause during
the eighteen months following the change in control, the Company will pay Mr.
May eighteen months base salary and certain additional payments. If Mr. May does
not execute a general release of the Company and its representatives from
liability relating to his employment or association with the Company, then Mr.
May only will be entitled to a severance payment of one month of his base salary
upon termination.
RECENT DEVELOPMENTS
The Company signed an agreement in April 1999 with Volvo Trucks North
America, Inc. pursuant to which the companies have agreed to a partnership to
design the first Internet-ready truck for professional drivers, which will have
special connection ports on the exterior of trucks and interior wiring. The
truck design is part of a comprehensive strategic co-marketing agreement between
the two companies. Under the agreement Volvo may offer PNV Network services as a
feature in some lease packages and as an option in others and will advertise on
the Company's Driver Entertainment Network channel and in the Company's Connect
Magazine. PNV Connect Magazine is a monthly periodical published by the Company
to give drivers a cable-programming guide for the PNV Network. The Company
expects to solicit other advertisers and to include feature articles in this
magazine.
The Company is in the process of making Connect Magazine full color,
high-gloss and with expanded distribution. The Company is positioning the
magazine as a lifestyle magazine with feature articles on how truck drivers can
make life better on the road. The Company expects that this new format will
attract advertisers to the magazine.
RESULTS OF OPERATIONS
Three months and nine months ended March 31, 1999 and 1998
Revenues. The Company's net revenues increased 164% to $2,288,000 for
the three months ended March 31, 1999 from $868,000 for the three months ended
March 31, 1998. The net revenues of $2,288,000 for the three months ended March
31, 1999 increased 15% from $1,985,000 for the pervious quarter ended December
31, 1998. Service revenues increased 163% to $2,213,000 for the three months
ended March 31, 1999 from $841,000 for the three months ended March 31, 1998.
Equipment sales increased to $66,000 for the three months ended March 31, 1999
from $19,000 for the three months ended March 31, 1998. For the nine months
ended March 31, 1999 net revenues increased 185% to $5,997,000 from $2,106,000
for the nine months ended March 31, 1998. Service revenues increased 195% to
$5,833,000 for the nine months ended March 31, 1999 from $1,974,000 for the nine
months ended March 31, 1998. Equipment sales increased 44% to $140,000 for the
nine months ended March 31, 1999 from $97,000 for the nine months ended March
31, 1998. The increase in revenues for the three months and nine months ended
March 31, 1999 was primarily due to additional subscriptions to the PNV Network
and the sale of long distance phone time.
Cost of Revenues. Cost of revenues, excluding service depreciation,
increased 155% to $3,175,000 for the three months ended March 31, 1999 from
$1,243,000 for the three months ended March 31, 1998. Cost of revenues,
excluding service depreciation, increased to $3,175,000 for the three months
ended March 31, 1999 from $2,891,000 for the previous quarter ended December 31,
1998. For the nine months ended March 31, 1999 cost of revenues, excluding
service depreciation, increased 173% to $7,950,000 for the nine months ended
March 31, 1999 from $2,917,000 for the nine months ended March 31, 1998. The
increase in cost of revenues for the three months and nine months ended March
31, 1999 is principally due to costs associated with the increase in the number
of sites of the PNV Network, the costs associated with the increase in sales
volume, and, with respect to the three months ended March 31, 1999, routing
equipment leases incurred in connection with the upgrading of the PNV Network.
The number of active sites increased 108% to 212 as of March 31, 1999 from 102
active sites as of March 31, 1998. Cost of revenues includes commission payable
to truckstops, cable programming, leased telephone lines and purchased long
distance minutes, equipment, freight, site repairs, and, with respect to the
three months ended March 31, 1999, routing equipment leases incurred in
connection with the upgrading of the PNV Network. In particular, the cost of
phone lines and purchased long distance minutes increased 167% to $1,171,000 for
the three months ended March 31, 1999 from $438,000 for the three months ended
March 31, 1998. For the nine months ended March 31, 1999 the cost of phone lines
and purchased long distance minutes increased 208% to $2,730,000 from $886,000
for the nine months ended March 31, 1998. This increase is due to the increase
in the number of sites, long distance telephone minutes included with
memberships and the addition of T-1 lines, which began to be installed at the
Company's sites in the three month period ended December 31, 1998. Service
depreciation increased $748,000 to $1,260,000 for the three months ended March
31, 1999 from $512,000 for the three months ended March 31, 1998. Service
depreciation increased $1,918,000 to $3,130,000 for the nine months ended March
31, 1999 from $1,212,000 for the nine months ended March 31, 1998. The increase
in service depreciation reflects the additional buildout of the PNV Network.
Fixed costs are a significant portion of cost of revenues and are expected to
increase.
<PAGE> 11
Gross Margin. The gross margin was a negative amount of $2,147,000 for
the three months ended March 31, 1999 compared to a negative amount of
$1,953,000 for the previous quarter ended December 31, 1998 and to a negative
amount of $887,000 for the three months ended March 31, 1998. For the nine
months ended March 31, 1999 the gross margin was a negative amount of $5,084,000
compared to a negative gross margin of $2,022,000 for the nine months ended
March 31, 1998.
Selling Expense. Total selling expense increased 61% to $2,242,000 for
the three months ended March 31, 1999 from $1,397,000 for the three months ended
March 31, 1998. The increase was primarily attributable to an increase in
salaries and marketing expenses. Salaries increased 48% to $1,120,000 for the
three months ended March 31, 1999 from $758,000 for the three months ended March
31, 1998. Marketing expenses increased 172% to $765,000 for the three months
ended March 31, 1999 from $281,000 for the three months ended March 31, 1998.
The increase in salary expense reflects the additional sales personnel needed
for new sites and the increase in marketing expenses reflects the additional
marketing efforts to increase PNV subscriptions.
For the nine months ended March 31, 1999, total selling expense
increased 86% to $6,261,000 from $3,368,000 for the nine months ended March 31,
1998. The increase was primarily attributable to an increase in salaries, travel
and marketing expenses. Salaries increased 71% to $3,046,000 for the nine months
ended March 31, 1999 from $1,778,000 for the nine months ended March 31, 1998.
Travel expenses increased 41% to $1,005,000 for the nine months ended March 31,
1999 from $715,000 for the nine months ended March 31, 1998. Marketing expenses
increased 170% to $2,087,000 for the nine months ended March 31, 1999 from
$774,000 for the nine months ended March 31, 1998. The increase in salaries and
travel reflects the additional sales personnel needed for new sites. The
increase in marketing expenses reflects additional marketing efforts to increase
PNV subscriptions.
General and administrative expenses. Total general and administrative
expenses increased 123% to $2,595,000 for the three months ended March 31, 1999
from $1,162,000 for the three months ended March 31, 1998. The increase was
primarily attributable to an increase in salaries, travel and professional fees.
Salaries increased 103% to $1,402,000 for the three months ended March 31, 1999
from $690,000 for the three months ended March 31, 1998. Travel expense
increased 99% to $265,000 for the three months ended March 31, 1999 from
$133,000 for the three months ended March 31, 1998. Professional fees increased
131% to $134,000 for the three months ended March 31, 1999 from $58,000 for the
three months ended March 31, 1998.
For the nine months ended March 31, 1999, total general and
administrative expenses increased 142% to $7,518,000 from $3,103,000 for the
nine months ended March 31, 1998. The increase was primarily attributable to an
increase in salaries, travel and professional fees. Salaries increased 130% to
$3,814,000 for the nine months ended March 31, 1999 from $1,655,000 for the nine
months ended March 31, 1998. Professional fees increased 162% to $401,000 for
the nine months ended March 31, 1999 from $153,000 for the nine months ended
March 31, 1998. Travel expenses increased 123% to $726,000 for the nine months
ended March 31, 1999 from $326,000 for the nine months ended March 31, 1998.
Interest Expense (Income) and Other- Net. Interest expense (income) and
other - net increased to $2,217,000 for the three months ended March 31, 1999
from $(108,000) of interest income for the three months ended March 31, 1998.
For the nine months ended March 31, 1999 interest expense (income) and other-net
increased to $5,913,000 from $(373,000) of interest income for the nine months
ended March 31, 1998. The additional net interest expense for the three and nine
months ended March 31, 1999 compared to the three month and nine ended March 31,
1998 is primarily attributable to the interest expense on Series A 13% Senior
Notes due 2008 in the aggregate principal amount of $75,000,000 issued in May
1998 (the "Old Notes"). Pursuant to an exchange offer completed in December
1998, the Company exchanged the Old Notes for Series B 13% Senior Notes due 2008
in the aggregate principal amount of $75,000,000 (the "New Notes"), which are
registered with the Securities and Exchange Commission.
Net Loss. The Company's net loss increased 176% to $9,202,000 for the
three months ended March 31, 1999 from $3,337,000 for the three months ended
March 31, 1998. The net loss increased 205% to $24,776,000 for the nine months
ended March 31, 1999 from $8,120,000 for the nine months ended March 31, 1998.
The Company expects to incur a significant net loss and negative cash flow from
operations at least through the fiscal year ending June 30, 1999.
<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $18,398,000 and $7,433,000
for the nine months ended March 31, 1999 and 1998, respectively. The $10,965,000
increase in net cash used in operating activities for the nine months ended
March 31, 1999 compared to the nine months ended March 31, 1998 primarily
resulted from an increase in the net loss of $16,656,000 to $24,776,000 for the
nine months ended March 31, 1999 compared to a net loss of $8,120,000 for the
nine months ended March 31, 1998. The net loss was offset by an increase in
non-cash expenditure for depreciation, amortization and stock option
compensation expense of $2,906,000 to $4,192,000 for the nine months ended March
31, 1999 from $1,286,000 for the nine months ended March 31, 1998.
Net cash provided by (used in) investing activities was $2,241,000 and
$(9,822,000) for the nine months ended March 31, 1999 and 1998, respectively.
The $12,063,000 decrease in net cash used in investing activities for the nine
months ended March 31, 1999 compared to the nine months ended March 31, 1998
resulted from the sale of short term and restricted investments for working
capital requirements in the amount of $17,851,000 for the nine months ended
March 31, 1999. This was offset by an increase in capital expenditures of
$5,788,000 to $15,610,000 for the nine months ended March 31, 1999 from
$9,822,000 for the nine months ended March 31, 1998. The increase in capital
expenditures was the result of the installation of the PNV Network at
approximately 106 truckstops during the nine months ended March 31, 1999
compared to 73 installations completed during the nine months ended March 31,
1998.
Net cash (used in) provided by financing activities was ($711,000) and
$17,314,000 for the nine months ended March 31, 1999 and 1998, respectively. The
$18,025,000 decrease in net cash provided by financing activities for the nine
months ended March 31, 1999 compared to the nine months ended March 31, 1998
resulted primarily from issuance of Series C Preferred Stock during the nine
months ended March 31, 1998.
In the nine months ended March 31, 1999, the Company's working capital
decreased $32,930,000 from June 30, 1998. The decrease was primarily
attributable to a decrease in cash and cash equivalents of $16,868,000 and a
decrease in short term investments of $13,826,000 and an increase in accrued
interest of $2,763,000.
The Company's capital commitments consist primarily of capital leases
and noncancelable operating leases for office space, furnishings, equipment and
T-1 lines. In addition, the Company has entered into a contract for the purchase
of long distance and other telephone services that contain minimum purchase
requirements for a two-year period. Pursuant to the contract for the lease of
T-1 lines, the Company is required to lease approximately (i) 200 T-1 lines
having minimum payments, before available discounts, of $5.1 million during the
first year following the start-up period, and (ii) 300 T-1 lines having a
minimum payments, before available discounts, of $7.7 million during the second
and third years following February 1999. In addition, the Company's contract
with AT&T for long distance and other telephone services requires the Company
for a term of two years to purchase each month, at minimum, services having an
undiscounted price of $40,000 based upon standard AT&T rates. Discounts are
available under each contract. The Company may terminate the contracts with AT&T
at any time, but, upon termination, the Company generally would become obligated
to pay to AT&T the remaining aggregate undiscounted required minimum amounts
under each contract. In addition, the Company has committed to leasing routing
and switching equipment for the wide area network at each truckstop at which the
PNV Network is available estimated at an aggregate expenditure of $3.6 million
($15,000 per site) over a three year lease term. Such installation, together
with the installation of the T-1 lines, will substantially complete the
Company's planned enhancements to the PNV Network. The majority of the routing
equipment has been installed during the three months ending March 31, 1999 and
the operating lease payments have begun during this period.
The Company believes that it will cost the Company approximately $6,000
to install the prepaid phone card equipment required under the Telecom Service
Agreement and $8,000 per site for increased telephone switch capacity to
accommodate public access telephone service (coin and coinless pay stations) at
each site. Based on these cost estimates and the installation of such equipment
at each of the approximately 145 truckstops currently owned or operated by TA,
the Company would spend approximately $2,030,000 in the aggregate to install the
necessary equipment. If the Company does not install such equipment at each of
the approximately 145 truckstops or fails to meet the agreed buildout schedule,
then TA may terminate the Telecom Service Agreement.
The Company's cash and short-term investments as of May 10, 1999 was
approximately $17.8 million available for working capital which does not include
restricted investments in which the Company is required to use to pay interest
on Series B 13% Senior Notes due 2008 until May 15, 2000. If the Company does
not raise additional capital the Company could experience
<PAGE> 13
liquidity problems. There can be no assurance that such capital requirements
will be available on terms satisfactory to the Company, if at all. Any inability
to fund its future capital requirements will have a material adverse effect on
the Company's business, financial condition and operating results.
YEAR 2000
A potential problem exists for all companies that rely on computers as
the year 2000 approaches. The "Year 2000" problem is the result of the past
practice in the computer industry of using two digits rather than four to
identify the applicable year. This practice could result in incorrect results
when computers perform arithmetic operations, comparisons or data field sorting
involving years later than 1999. The Company is in the process of conducting a
review of its computer systems to identify the systems that could be affected by
the "Year 2000" issue and is developing a plan to address the issue. The Company
will utilize both internal and, if needed, external resources to reprogram or
replace and test all of its software for Year 2000 compliance, and the Company
expects to complete the project during the second half of 1999. The Company has
a preliminary estimate of $200,000 as the maximum cost of evaluating, testing,
reprogramming, and modifying its software. The estimate is based on the belief
that no major problems will be encountered in becoming Year 2000 compliant.
Based on its preliminary internal review, the Company believes that the
Company-developed software is Year 2000 compliant. However, the Company plans to
do more extensive testing of the PNV Software during the current calendar year
which may require the use of independent consultants to assist in the Company's
evaluation to assure a correct assessment of cost and risk. In addition, the
Company relies on third party vendors which must also become Year 2000
compliant. The Company has a significant reliance on outside vendors such as
telephone companies, satellite system providers, electrical providers and the
wide area network supplier. These services are critical in the Company's ability
to generate revenue. The ability of third parties with which the Company
transacts business to adequately address their Year 2000 issues is outside of
the Company's control. The Company is planning to create a comprehensive list of
all internal and external software programs to assure that a full review of such
software is completed. However, if any necessary modifications to the PNV
Software are not completed in a timely manner or if the Company's vendors are
not Year 2000 compliant, the Year 2000 problem may have a material
adverse-impact on the operations of the Company. The Company has not made any
progress in assessing its non-information technology systems. These types of
systems are more difficult to assess and repair than information technology
systems and the Company may have to replace the non-information technology
systems that cannot be repaired. The Company will begin reviewing its
non-information technology systems in the second half of 1999. The Company
presently has no basis on which to estimate the costs of assessing and repairing
or replacing its non-information technology systems or to determine whether such
costs will have a material adverse effect on the Company's operations or
financial condition.
RISK FACTORS
Future Capital Requirements; Uncertainty of Additional Funding
The Company expects that it will have significant capital requirements
in the future to fund the continued expansion of its business, including the
effort to become an ISP, to develop a web site, portal, and for other current
working capital purposes. There can be no assurance that such capital
requirements will be available on terms satisfactory to the Company, if at all.
The Company's capital requirements will depend on numerous factors, including
the growth of the Company's revenues, if any, and the rate of such growth. Once
the Company has used the net proceeds from the sale of the Old Notes, if the
Company's cash flow from operations is not sufficient to provide funds for
working capital and capital expenditures and if equity or debt or other
financing is not available, the Company expects that it may experience
insufficient liquidity which could have a material adverse effect on the
Company's financial condition and results of operations. There can be no
assurance that additional financing will be available when needed, if at all,
or, if available, on terms acceptable to the Company. If adequate funds are not
available on acceptable terms, the Company will be required to delay or limit
any further expansion of its business. Any inability to fund its future capital
requirements would have a material adverse effect on the Company's business,
financial condition and operating results.
Ability to Sustain and Increase Subscription Sales; Retention
The future success of the Company depends upon its ability to
significantly increase its revenues which, in turn, depends materially upon its
ability to increase the number of subscribers to the PNV Network. During March
1999, the Company had approximately 35,500 active subscribers of whom
approximately 21,500 had subscribed on a monthly basis (including subscription
sales at the Company's vending machines at truckstops, pursuant to a monthly
subscription program referred to as the "Power Plan
<PAGE> 14
Program" and pursuant to the Company's contracts with fleet trucking companies)
and 14,000 were daily subscribers. To date, the Company's average revenue per
subscriber has been lower than expected which the Company believes is due
primarily to the relatively large number of daily subscribers as compared to
monthly subscribers and to lower than anticipated usage by truck drivers of long
distance telephone minutes offered by the Company.
Even if truck drivers initially subscribe to the PNV Network, there can
be no assurance that they will renew their subscriptions. Of those subscribers
who purchased a subscription in September 1998, Company data indicates that
approximately 70% renewed their subscriptions at least once between that
subscription and March 1999. In October 1997, the Company implemented the Power
Plan Program, which was designed to increase monthly subscription renewals.
Pursuant to this program, a subscriber's monthly subscription is automatically
renewed and the monthly fee is automatically drafted from or charged to the
subscriber's checking account or credit card until the subscriber cancels the
subscription. During March 31, 1999, the Company had 13,594 monthly subscribers
pursuant to the Power Plan Program, which compares to 13,600 during December 31,
1998. Since March 1999 the Company has offered a program pursuant to which fleet
trucking companies either would permit automatic payroll deductions as a means
for the fleet's truck drivers to pay for the truck drivers' subscriptions to the
PNV Network or would subsidize a portion of the subscription rate for their
truck drivers, each of which the Company believes will increase monthly
subscription renewals. There are many factors that could cause a subscriber not
to renew a subscription, including dissatisfaction with the PNV Network and the
services offered or with the number and location of the truckstops at which the
PNV Network is available.
The Company's ability to increase subscriptions to the PNV Network
depends significantly upon its ability to increase sales to fleets. During the
three month period ended March 31, 1999, the Company did not enter into any
significant contracts with fleet trucking companies. The number of drivers
sponsored by the fleets under contract with the Company was 2,861 during March
1999.
The ability of the Company to attract and retain subscribers will also
depend in part on the ability of such subscribers to access a stall at a
truckstop served by the PNV Network and, with regard to the use of the Company's
telephone services, to access one of the local telephone lines maintained by the
Company in connection with the telephone service offered. Subscribers may on
occasion be unable to utilize the PNV Network due to a lack of open stalls at
some of the busier truckstops. In addition, truck drivers may find that the
truckstops served by the PNV Network are not conveniently located. If truck
drivers find that the truckstops served by the PNV Network are not conveniently
located, it is unlikely that they will purchase or renew subscriptions. The
Company's inability to attract and retain subscribers and to significantly
increase revenues from sales of subscriptions, including subscription sales to
fleets, for any reason, would have a material adverse effect on the Company's
business, financial condition and results of operations, including its ability
to make payments on the Notes.
Limited History of Operations
The Company was incorporated in September 1995. Accordingly, there is
limited financial information about the Company upon which to base an evaluation
of the Company's performance. Given the Company's limited operating history,
there is no assurance that it will be able to generate sufficient cash flow to
service its debt obligations or to achieve its objectives.
History of Losses, Negative Cash Flow and Negative Gross Margin
The Company has experienced a net loss and negative cash flow from
operations in each quarter since it was incorporated. As of March 31, 1999, the
Company had a common stockholders' deficit of $46.9 million. The Company expects
to incur a significant net loss and negative cash flow from operations at least
through the fiscal year ending June 30, 1999. There can be no assurance that the
Company will ever be profitable. From September 1995 to date, the Company's cost
of revenues has been substantially higher than its revenues, leading to a
negative gross margin. There can be no assurance that the Company will generate
significant revenue in the future, and even if it does so, that the Company's
revenues will ever exceed its cost of revenues.
<PAGE> 15
Substantial Leverage; Possible Inability to Service Indebtedness
As a result of the issuance of the Old Notes, which now have been
exchanged for the New Notes, the Company is highly leveraged. At March 31, 1999,
the Company had total long-term debt of $70.7 million and a common stockholders'
deficit of $46.9 million. The Company's earnings were insufficient to cover its
fixed charges and preferred stock dividend requirements by approximately $26.9
and $10.1 million for the nine months ended March 31, 1999 and 1998,
respectively. The Company is permitted to incur additional indebtedness in the
future under the indenture relating to the New Notes, subject to the
restrictions set forth in such indenture.
The Company's ability to make scheduled payments of principal of, or to
pay interest or liquidated damages, if any, on its indebtedness will depend on
the Company's future performance which, to a certain extent is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. There can be no assurance that the
Company's business will generate sufficient cash flow from operations and that
anticipated revenue growth will be realized in an amount sufficient to enable
the Company to service its indebtedness or to continue the installation of the
PNV Network and the payment of the costs associated with the provision of
telecommunications and entertainment services and its operations.
The degree to which the Company is leveraged could have important
consequences to the Company's future prospects, including the following: (i)
limiting the ability of the Company to obtain any necessary financing in the
future for working capital, capital expenditures, debt service requirements or
other purposes; (ii) the Company's vulnerability to the effects of general
economic downturns or to delays or increases in the costs of installing the PNV
Network or planned subsequent improvements thereto or providing planned
telecommunications services in addition to those currently provided may be
increased; (iii) limiting the flexibility of the Company in planning for, or
reacting to, changes in its business; (iv) leveraging the Company more highly
than some of its potential competitors, which may place it at a competitive
disadvantage; (v) increasing its vulnerability in the event of a downturn in its
business or the economy generally; and (vi) requiring that a substantial portion
of the Company's cash flow from operations be dedicated to the payment of
principal and interest on the New Notes and not be available for other purposes.
The Company expects to generate significant negative cash flow at least
through the fiscal year ending June 30, 1999. If the Company does not ultimately
generate sufficient cash flow to meet its debt service and capital requirements,
the Company may need to examine alternative strategies that may include actions
such as reducing or delaying capital expenditures, restructuring or refinancing
its indebtedness, the sale of assets or seeking additional equity, debt or other
financing. There can be no assurance that any of these strategies could be
effected on satisfactory terms, if at all. In addition, there can be no
assurance that the Company will be able to effect any such refinancing on
commercially reasonable terms or at all.
Expansion of PNV Network Installation
The Company's ability to achieve its objectives will depend in large
part on the timely and cost-effective installation of the PNV Network at a
significant number of additional truckstops and the addition of T-1 lines and
certain additional equipment at all the truckstops at which the PNV Network is
available. The success of the Company in installing the PNV Network will depend
on, among other things, timely performance by the third parties of their
contractual obligations. Due to slower membership growth, lower revenue growth
per subscriber, and higher costs, in January 1999 the Company slowed the
buildout of the PNV Network from a planned 10 to 15 new sites per month to 6 to
8 new sites per month to conserve cash and to allow for continued emphasis in
sales, marketing and development of new services. There can be no assurance that
the Company will be able to achieve its buildout rate as planned and any failure
to do so could have a material adverse effect on the Company's business,
financial condition and results of operations.
To date, the installation of the PNV Network at truckstops by outside
contractors has been completed substantially on the Company's schedule and
within its budget, and the installation services performed by such contractors
have been satisfactory to the Company. Although management believes that there
are a number of contractors that could perform the required installation
services
<PAGE> 16
or that the Company could employ sufficient persons to perform such services,
there can be no assurance that it will be able to obtain the services of outside
contractors that can install the PNV Network on a timely basis and at a cost
acceptable to the Company.
In connection with planned enhancements to the PNV Network, the Company
intends to install T-1 lines, in addition to local telephone lines, at each
truckstop served by the PNV Network. The Company has entered into a contract
with AT&T for the lease of T-1 lines. Any delay in the installation of the T-1
lines or adverse weather or other complications could significantly delay the
Company's planned increase in the number of truckstops served by the PNV
Network. Such delay or an increase in the cost associated with the installation
of the PNV Network could adversely affect the Company's planned buildout of the
PNV Network which in turn could adversely affect the Company's ability to create
substantial demand for its services and increase subscription sales and, as a
result, the Company's business, financial condition and results of operations.
Minimum Requirements Contracts
The Company has entered into contracts with AT&T for the lease of T-1
lines and the purchase of long distance and other telephone services. These
contracts require the Company to pay a specified minimum dollar amount of lease
payments and to purchase a specified minimum dollar amount of long distance
telephone services, each of which amounts is subject to certain discounts based
on the T-1 lines leased and the telephone services purchased. The Company's
ability to achieve its objectives depends in significant part on its ability to
obtain these discounts. Any failure to obtain the available discounts with
regard to its T-1 line lease payments and its long distance telephone service
rates could have a material adverse effect on the Company's business, financial
condition and results of operations.
In addition, the Company has entered into an operating lease for a wide
area network with an annual minimum rental amount of approximately $1.2 million
for a three year term.
Future Revenue Streams; Cost Savings
The Company's ability to achieve its objectives depends significantly
on its ability to generate revenues from planned future services and recognize
cost-savings from planned enhancements to the PNV Network. The PNV Network as
currently designed does not have the capacity to provide certain of these
planned future services and the capacity of the proposed PNV Network
architecture to provide such services is untested and the market for such
services is undetermined. Any inability of the Company to generate revenue from
such planned future services or realize anticipated cost-savings could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Potential Unavailability of Equipment
The Company purchases its satellite equipment, head-end equipment,
telephone and cable switching equipment, computer hardware and cable programming
from outside suppliers. The Company has no purchase agreements with any such
supplier other than its cable programming supplier, Echostar Communications
Corporation ("Echostar"). The Company presently purchases its satellite
equipment and computer hardware from a sole supplier and management believes
that limited alternative sources for such items exist. The Company believes that
its relationships with the suppliers of these items are good. However, if the
Company were required to purchase telephone switching equipment from another
source, it would require reprogramming of certain of the Company's software or
if the Company were required to purchase any alternative equipment from another
source, it would require that the Company modify and redesign the PNV Network in
certain respects which, in each case, could result in service delays and expense
to the Company. In addition, the Company purchases the cable programming offered
through the PNV Network from Echostar. Although management believes that limited
alternative sources for cable programming exist, utilizing an alternative source
could require retrofitting certain equipment at each truckstop site and could
result in an interruption in the Company's ability to offer cable television
services through the PNV Network for a limited period of time. Any failure of
the Company to obtain any of the foregoing equipment, particularly its cable and
telephone switching equipment, or cable programming, could have a material
adverse effect on the Company's ability to expand its business in a timely
fashion and, as a result, on its results of operations and financial condition.
<PAGE> 17
Management of Growth
The Company has expanded its operations significantly over the past 12
months, placing significant demands on its financial, marketing and sales,
administrative and operational personnel and systems. In connection with its
planned expansion of the PNV Network locations and services, management has been
and in the future will be required to recruit, organize, train and manage
additional personnel to perform, among other things (i) the planning and
engineering activity associated with the installation of the PNV Network at each
truckstop, (ii) the assembly at the Company's headquarters of the electronics
and other equipment comprising the PNV Network and the loading of such equipment
for delivery to each site, (iii) the inspection of each site upon completion of
the installation, (iv) the training of the truckstop employees and (v) the
marketing and promotion of the PNV Network at each site. The Company's success
in managing the expansion of its business will depend to a large extent on the
Company's ability to hire, train and supervise such additional personnel. There
can be no assurance that the Company will be able to attract, train, supervise
and retain an adequate number of such personnel. The failure of the Company to
effectively manage the growth in its business and to develop the additional
personnel, systems, resources, procedures and controls necessary to support that
growth in a timely manner would have a material adverse effect on the Company's
business, financial condition and results of operations.
Competition
In the voice and data communication and entertainment arenas, the
Company competes with various elements of other providers' offerings based on
ease of access, functionality and cost. These industries are highly competitive
and the Company expects to face strong competition from existing and potential
competitors. These potential competitors comprise a broad range of companies
engaged in telecommunications and entertainment, including but not limited to,
public pay telephone operators, cellular telephone companies, long distance
telephone companies, cable operators, direct broadcast satellite companies, as
well as companies developing new technologies. Certain of these competitors and
potential competitors are well established companies and have significantly
greater financial, marketing and programming resources than the Company.
The Company's telecommunication services compete with cellular
telephones, pay telephones and providers of long distance cards and prepaid
cards. Cellular service is widely available and, although it is currently more
expensive than the PNV Network, it is becoming more affordable. The Company
believes that drivers currently use pay telephones located at truckstops for a
significant number of the calls they make and there can be no assurance that the
Company will successfully attract customers who predominately use these pay
telephones. The Company understands that one company, HighwayMaster, resells
cellular telephone service to provide both voice and data communication to the
truck cab. The Company's long distance services compete with providers of long
distance cards and pre-paid cards such as AT&T and MCI and with providers of
toll free (800 and 888) numbers that fleets or even individuals use to call
fleet headquarters or home. Qualcomm's OmniTRACS service is used primarily for
mobile vehicle location and two-way text messaging and it addresses the trucking
fleets' need for real-time mobile text communication. Based on publicly
available data, the OmniTRACS service has an installed base of approximately
210,000 units in 32 countries worldwide, of which the Company believes that over
150,000 units are installed in the United States which would compete with
certain of the Company's services. In addition, the Company believes that there
is a company that has begun installing Internet/e-mail kiosks in truckstops.
There can be no assurance that the Company will be able to effectively compete
against these or future telecommunications competitors, many of which have large
customer bases and significantly more resources than the Company.
With respect to entertainment, the Company's competition currently
consists of entertainment alternatives located outside the truck cab and
primarily in the truckstop. Community television and game rooms inside the
truckstop are the most readily available entertainment alternatives for
long-haul truck drivers. The Company believes that a small number of
professional truck drivers have purchased direct broadcast satellite dishes to
receive television programming in their cab. There can be no assurance that the
Company will be able to compete successfully against the providers of cable and
digital satellite programming services, most of which will have access to
greater resources and provide more programming than the PNV Network.
Substantial Reliance on Key Personnel
The success of the Company is dependent to a significant extent on the
personal efforts and abilities of its senior management, including the newly
appointed Chief Executive Officer, Robert P. May. Mr. May is the only senior
officer with an employment agreement, but the Company may terminate the
employment agreement at any time. The Company believes that the loss
<PAGE> 18
of services of any member of its senior management could have a material adverse
effect on the Company. The Company maintains key man term life insurance on the
life of Mr. Williams, the Chairman of the Board, in the amount of $1.0 million,
payable to the Company. There can be no assurance that the Company will be able
to retain its senior management or that it will be able to attract or retain
other skilled personnel in the future.
Regulatory Matters
The FCC and relevant state regulatory authorities ("PSC's") have the
authority to regulate interstate and intrastate telephone rates, respectively,
ownership of transmission facilities and the terms and conditions under which
certain of the Company's telephone service offerings are provided. Federal and
state regulations and regulatory trends have had, and in the future are likely
to have, both positive and negative effects on the Company and its ability to
compete. There can be no assurance that changes in current or future federal or
State regulations or future judicial changes would not have a material adverse
effect on the Company's business, financial condition or results of operations.
Interstate telecommunications carriers are subject to a number of other
federal regulatory obligations and reporting requirements, including obligations
to contribute to universal service and other subsidy funds, to permit resale of
their services by other carriers, and to take certain steps to protect
consumers. While the Company does not believe the burdens imposed by federal
regulations will be onerous, failure to comply with applicable regulations could
result in fines or other penalties, including loss of authority to provide
interstate service.
The intrastate operations of the Company are subject to various state
laws and regulations. Most states require the Company to apply for certification
to provide long distance telecommunications services, operator services, pay
phones or competitive local exchange services, or to register or be found exempt
from regulation, before commencing intrastate services. Most states also require
the Company to file and maintain detailed tariffs listing their rates for
intrastate service. Many states also impose various reporting requirements
and/or require prior approval for transfers of control of certified carriers,
assignment of carrier assets, including customer bases, carrier stock offerings,
incurrence by carriers of significant debt obligations and acquisitions of
telecommunications operations. Other regulatory requirements may mandate that
the Company permit resale of its services by other companies, make payments to
intrastate universal service and similar funds, and take certain steps to
protect consumers. Certificates of authority can generally be conditioned,
modified, canceled, terminated and revoked by state regulatory authorities for
failure to comply with state law and/or rules, regulations and policies of the
state regulatory authorities. Fines and other penalties also may be imposed for
such violations. Any delay by the Company in complying with these state laws and
regulations would limit the Company's ability to provide telecommunications
services to the long-haul trucking industry. In addition, if the Company were
not to be in compliance with relevant state laws and regulations, the
appropriate state regulatory body may force the Company to suspend offering its
telecommunications services in such state. Such an event could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Although the Company has not determined whether all of its current and
anticipated telephone service offerings are subject to regulation by all state
and federal regulatory authorities, the Company is in the process of obtaining
authority, pursuant to regulation, certification, tariffs, notifications, or on
an unregulated basis, to provide intrastate interexchange service in the 48
contiguous states and Hawaii. The Company currently is authorized to provide
such services in all such states except North Carolina in which the application
is pending. The interpretation and enforcement of such laws and regulations in
relation to the Company's current and future service offering may vary, and
there can be no assurance that the Company will be in compliance with all such
laws and regulations at any one point in time.
Various state and federal regulatory factors may have an impact on the
Company's ability to service customers. Many of the rights and obligations
created by statute and regulation are subject to ongoing regulatory
implementation proceedings and review by the courts, and are subject to change.
Changes to some regulations could benefit the Company, while other changes could
make it more difficult for the Company to compete.
Cable television companies are subject to extensive governmental
regulation. The Company does not believe that it is subject to such regulations.
However, in the event the Company is required to comply with such regulations,
the expense, potential delay and management distraction potentially resulting
from the compliance process could have a material adverse effect on the
Company's results of operations and financial condition.
<PAGE> 19
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is involved in legal proceedings from time to time, none of
which management believes, if decided adversely to the Company, would have a
material adverse effect on the business, financial condition or results of
operations of the Company.
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
<S> <C>
10.1+ Telecom Service Agreement, dated as of January 27, 1999, by and between the Company and TA
Operating Corporation.
10.2 Employment Agreement, dated as of March 1, 1999, by and between the Company and Robert P. May.
10.3 Nonqualified Stock Option Award Agreement, dated as of March 3, 1999, by and between the
Company and Robert P. May.
10.4 Joinder to Stock Purchase Agreement and Related Documents, dated as of March 1, 1999, by
Robert P. May.
10.5 Letter Agreement, dated as of March 3, 1999, by and between the Company and Robert P. May.
10.6+ Warrant, dated as of March 12, 1999.
27 Financial Data Schedule.
+ Portions of this Exhibit are omitted and filed separately with the Securities and Exchange Commission
pursuant to a request for confidential treatment.
</TABLE>
(b) Reports on Form 8-K (for SEC use only)
None
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PARK `N VIEW, INC.
Date: May 14, 1999 /s/ Robert P. May
---------------------- -------------------------------------------
Robert P. May, Chief Executive Officer
Date: May 14, 1999 /s/ R. Michael Brewer
---------------------- -------------------------------------------
R. Michael Brewer, Vice President - Finance
and Chief Financial Officer
<PAGE> 21
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
- -------------- ----------------------
<S> <C>
10.1+ Telecom Service Agreement, dated as of January 27, 1999, by
and between the Company and TA Operating Corporation.
10.2 Employment Agreement, dated as of March 1, 1999, by and
between the Company and Robert P. May.
10.3 Nonqualified Stock Option Award Agreement, dated as of March
3, 1999, by and between the Company and Robert P. May.
10.4 Joinder to Stock Purchase Agreement and Related Documents,
dated as of March 1, 1999, by Robert P. May.
10.5 Letter Agreement, dated as of March 3, 1999, by and between
the Company and Robert P. May.
10.6+ Warrant, dated as of March 12, 1999.
27 Financial Data Schedule (For SEC use only)
+ Portions of this Exhibit are omitted and filed separately with
the Securities and Exchange Commission pursuant to a request
for confidential treatment.
</TABLE>
<PAGE> 1
EXHIBIT 10.1
[*] - Confidential Treatment Requested Pursuant to Rule 24b-2
TELECOM SERVICE AGREEMENT
THIS TELECOM SERVICE AGREEMENT (this "Agreement") is entered into this
27th day of January, 1999, by and between Park 'N View, Inc., a Delaware
corporation ("PNV"), with its headquarters at 11711 NW 39th Street, Coral
Springs, Florida 33065 and TA Operating Corporation, a Delaware Corporation,
d/b/a Travel Centers of America ("TA"), with its headquarters at 24601 Center
Ridge Road, Suite 200, Westlake, Ohio 44145.
WHEREAS, TA, itself or through its affiliates: (i) currently owns or
operates (or has entered into franchise agreements with certain entities
entitling them to operate) approximately 120 full-service travel plaza
truckstops which are located at the addresses listed on Schedules 1A, 1B and 1C
hereto; and (ii) may acquire or contract to operate other full-service travel
plaza truckstops, all of the aforesaid hereinafter individually being referred
to as a "Truckstop" and collectively being referred to as the "Truckstops"; and
WHEREAS, PNV has designed and developed the concept and equipment ("the
System") to provide the following telecom and other services: (i) pre-paid phone
cards; (ii) fleet telecom services; (iii) coin and coinless phones inside the
Truckstops; (iv) Frequent Fueler Card; (v) fleet in-bound 800 calling; and (vi)
internet access and data transmission (collectively the "Services").
WHEREAS, TA desires to engage PNV to install the System and provide the
Services at certain of the Truckstops.
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, TA and PNV (hereinafter collectively being referred to as the
"Parties"), intending to be legally bound, hereby mutually agree as follows:
1. Purpose. The Parties hereby agree that PNV shall install the
System and the Parties shall operate the System at TA's Truckstops pursuant to
the terms of this Agreement.
(a) Installation at Truckstops. The Parties acknowledge
and agree that TA, itself or through its affiliates, currently owns, operates or
has entered into franchise agreements with respect to (i) Truckstops which are
listed on Schedule 1A (constituting substantially all of the Truckstops which
are owned and operated by TA excluding those purchased from Burns Brothers);
(ii) Truckstops which are listed on Schedule 1B (constituting all of the
Truckstops which are owned by TA and operated pursuant to franchise agreements);
and (iii) Truckstops which are listed on Schedule 1C (constituting all of the
Truckstops which are not owned by TA and which are operated pursuant to
franchise agreements). Subject to the terms and conditions of this Agreement,
PNV shall have the right and obligation to (i) install the System and provide
the Services at each of the Truckstops listed on Schedules 1A and 1B (and at any
future Truckstops acquired by TA that TA makes available for installation of the
System); and (ii) subject to the approval of the Franchisee (as defined in
Section 1(b)) to enter into an agreement with the owner
<PAGE> 2
of each Truckstop listed on Schedule 1C. Within sixty (60) days of the date of
this Agreement PNV shall complete installation of the System and commence
provision of the Services at three (3) of the Truckstops listed on Schedule 1A
to be mutually agreed upon by PNV and TA (the "Initial Sites"). Within sixty
(60) days of completion of the installation of the System at the Initial Sites,
unless TA provides PNV with notice of termination by TA of this Agreement, which
TA may do in its sole discretion, PNV shall, subject to TA's (i) observance and
performance of its duties and obligations under this Agreement; and (ii)
reasonable cooperation with PNV to facilitate PNV's obligations hereunder,
commence installation of the System at the remaining Truckstops listed on
Schedules 1A and 1B that are not currently contractually committed to another
provider. PNV shall, subject to the terms and conditions of this Agreement,
complete the installation of the System and commence provision of the Services
at such Truckstops pursuant to a buildout schedule to be mutually agreed upon by
PNV and TA, which shall provide for installation of the System upon the
expiration of the foregoing sixty (60) day period at ten (10) Truckstops per
month on average. PNV shall, in all instances, install the PNV Equipment (as
defined in Section 2) in a high quality, workmanlike and efficient manner, with
the least interference possible with the business operations of each Truckstop.
During the installation period, no more than fifty percent (50%) of the existing
equipment currently in place shall be removed until the PNV Equipment (as
defined below) has been installed and the System is operational. Notwithstanding
the foregoing, the Parties agree that while PNV shall use its best efforts to
complete the installation of the System at the foregoing number of Truckstops
within the foregoing time frames, PNV's obligations to install the System at a
particular Truckstop or Truckstops shall be subject to: (i) TA having ownership
or control over such Truckstop at the time PNV commences installation of the
System; (ii) with respect to the Truckstops listed on Schedules 1B and 1C, the
Franchisee entering into an agreement with PNV pursuant to Section 1(b); (iii)
TA's authorizing PNV to install the System at the Truckstops; (iv) completion of
satisfactory engineering and structural surveys at such Truckstop(s); (v)
confirmation that no part of the System crosses a public right of way adjacent
to such Truckstop(s); (vi) confirmation that PNV may use the Truckstops existing
wiring or that it is otherwise economically feasible to install the necessary
wiring; (vii) receipt from TA of all requested maps, blue prints and other
relevant information relating to such Truckstop(s) on a timely basis; and (viii)
PNV not being able to complete any such installation within said time frame
because of any Force Majeure Condition (as defined in Section 13 below). During
the Term (as defined below), all long-distance telephone services to be provided
pursuant to this Agreement will be through AT&T unless TA consents in writing to
any other long-distance carrier.
(b) Installation at Franchisee Sites. The Parties
acknowledge and agree that, prior to installation of the System at any of the
Truckstops listed on Schedule 1B or Schedule 1C, which are operated by a
franchisee of TA (the "Franchisee"), PNV shall, enter into an agreement with
Franchisee upon terms acceptable to PNV and Franchisee (and as to which TA shall
have consented to in writing).
2. Installation of Equipment.
(a) PNV shall, at its sole cost and expense, and in the
manner herein provided and in accordance with industry standards, install and
continually maintain at each Truckstop at
-2-
<PAGE> 3
which the Services are to be provided all equipment necessary to provide the
Services. The equipment as currently used by PNV is described on Schedule 2
hereto and is hereinafter, together with any additions or deletions to said
equipment, collectively referred to as the "PNV Equipment"; provided, however,
the term "PNV Equipment" only will include any such equipment installed by PNV
pursuant to this Agreement. PNV reserves the right with the prior written
consent of TA to make additions to and deletions from the PNV Equipment to be
installed at each Truckstop. In addition all equipment, systems and procedures
used by PNV shall meet all legal and technical requirements of any governing
agency of local, state or federal jurisdiction. PNV will update and modernize
the System and the PNV Equipment from time to time as reasonably necessary such
that the System and the PNV Equipment perform in a manner consistent with
industry standards and in any event will upgrade the System and the PNV
Equipment so that the System and the PNV Equipment at the Truckstops will be
equivalent to that being installed by PNV at other third party locations.
(b) TA shall make available to PNV sufficient areas in
mutually agreed locations in which to install the PNV Equipment (collectively,
the "Equipment Area"). Upon reasonable prior notice to TA, PNV shall be entitled
to have continued access to the Equipment Area for purposes of installing,
repairing and monitoring the PNV Equipment, the System and the Services.
(c) Prior to commencement of installation of the System
at any Truckstop, PNV shall obtain TA's written approval of the methods and
materials to be used by PNV with respect to the installation of the System. PNV
will repair any damage to the Truckstop which is caused by PNV. However, PNV
shall not be responsible for any existing defects or deficiencies or the normal
wear and tear to the Truckstop. PNV shall provide TA written notice of any
defects or deficiencies discovered by PNV during installation.
(d) PNV shall on a timely basis secure, and continuously
maintain in full force and effect, all licenses, permits and approvals required
by governmental authorities with respect to the installation, operation and
maintenance of the System and providing the Services. TA shall within reason
assist PNV (at PNV's expense) in obtaining any such licenses, permits, or
approvals upon PNV's reasonable request. PNV shall at all times comply with all
applicable laws, rules, regulations, etc. in connection with the installation,
operation and maintenance of the System, or otherwise related to the performance
of PNV's obligations hereunder.
3. Rights and Duties of The Parties With Respect To The PNV
Equipment.
(a) Notwithstanding the fact that certain parts of the
PNV Equipment may be affixed to each Truckstop, the PNV Equipment shall not
become a fixture thereto and shall remain the property of PNV. Except as
otherwise provided herein, PNV shall pay all taxes or other fees related to
ownership and operation of the PNV Equipment. TA acknowledges that the System,
the Services and the PNV Equipment and the manner of its operation and
installation are proprietary to PNV. Accordingly, TA shall use its best efforts
to insure that all material confidential information and data concerning the
System, the Services and the PNV Equipment shall not be divulged, and (except in
the case of emergency or operation of the Truckstops in the
-3-
<PAGE> 4
ordinary course of business) that access to the System and the PNV Equipment
shall not be given to any person or persons other than personnel authorized by
PNV. The Parties agree that the obligations imposed under this Section 3 will
apply to all confidential information, except where such confidential
information: (i) is or becomes public knowledge or publicly available to TA
through no fault of TA; (ii) is learned by TA from a third party entitled to
disclose it; (iii) was already known to TA; (iv) is shown by TA to have been
independently developed by TA; or (v) is or becomes publicly available as a
result of issuance of a patent or publication of a foreign pending patent
application.
(b) Upon the termination of this Agreement for any
reason, PNV shall have the obligation to: (i) remove, at its sole cost and
expense, any or all of the PNV Equipment from each Truckstop; or (ii) if
agreeable to TA, sell or lease it to TA or its successors, nominees or
assignees. If PNV removes the PNV Equipment, PNV shall restore the Truckstop as
near as reasonably possible to the condition of such premises prior to the
installation of the System, normal wear and tear excepted, but shall not be
obligated or permitted without the prior consent of TA to remove any wiring. If
PNV does not comply with the terms of this Section 3(b) within 90 days after
termination of this Agreement, TA may treat the PNV Equipment as abandoned or
have the PNV Equipment removed and disposed of at the expense of PNV.
(c) If TA disposes of its interest in one or more
Truckstops at which the System has been installed (through a sale of assets,
change of control, closure or otherwise), TA shall, as a condition to such
event, either; (i) cause the acquiror of said Truckstop to assume TA's
obligations under this Agreement (in the case of the sale of all of its
Truckstops at which the System is installed); or enter into a separate agreement
with PNV on substantially similar terms (in the case of the sale of less than
all of the Truckstops at which the System is installed); or (ii) pay PNV an
amount equal to [*] as reduced by (a) [*]; and (b) [*]; provided that, TA may
[*] and TA may [*]. Upon payment to PNV of any amounts due pursuant to clause
(ii) above, title to the PNV Equipment [*] and is purchased by TA will transfer
to TA.
4. Services to Be Provided and Financial Terms.
(a) Pre-Paid Phone Card PNV will provide a pre-paid phone
card product and maintain a telecommunications platform capable of handling
current and future traffic needs, on the following terms:
1. Machines and System. Commencing on or after
March 1, 1999 and in any event by July 15, 1999, PNV shall install (and
thereafter shall maintain) pre-paid phone card vending machines at each
Truckstop and shall have exclusivity except for (i) currently existing
contractual obligations, including without limitation, [*]; and (ii) contractual
obligations applicable to any specific Truckstop(s) acquired by TA from time to
time. [*]; the Parties further agree that any prepaid phone card products
available at any Truckstop(s) acquired by TA from time to time will be phased
out of such Truckstop(s) as soon as the contracts relating to such prepaid phone
card products expire or terminate and that TA will not take any action to extend
or renew any such contract. The number and location of
-4-
<PAGE> 5
the machines at each Truckstop will be mutually agreed upon by PNV and TA and
the Parties agree that the TA-PNV pre-paid phone card vending machines shall
have priority placement over all other third party pre-paid phone card machines.
More than one machine will be placed at certain Truckstops based upon the number
of parking stalls, product demand and sales history. PNV will maintain and
administer the network and systems necessary to provide, account for and manage
the long distance phone time sold through the machines. Each pre-paid card will
be co-branded by PNV and TA. PNV will provide signage for the machines as per
mutually agreed upon specifications. TA shall have primary responsibility for
implementing marketing and sales promotions for the pre-paid phone card.
2. Financial Terms. The proposed pricing
(subject to change based upon PNV's tariffs with TA's written approval) to the
end user purchasing prepaid phone cards from a machine is as follows: (i) $10
cards at [*] per minute; (ii) $20 cards at [*] per minute; (iii) $50 cards at
[*] per minute; (iv) recharge cards as follows: [*] per minute for a $10
recharge, [*] per minute for a $20 recharge and [*] per minute for a $50
recharge which must be tracked and reported separate from vended prepaid
phonecard sales; (v) [*] for dial around compensation ("DAC") at any phone at
the Truckstop operated by PNV (a "TA-PNV phone"); and (vi) [*] unit surcharge at
non TA-PNV phones for DAC. For these purposes, one (1) unit is defined as one
(1) minute of phone time. The foregoing rates and charges may be changed from
time to time by letter agreement signed by both TA and PNV. PNV shall provide an
inventory of pre-paid phone cards at each machine and shall, subject to Section
8(b) of this Agreement, pay to TA a commission based on the difference between
the retail amount charged to drivers as set forth above and TA's cost based upon
the volume of long distance minutes sold as set forth on Schedule 3 hereto. All
phone minutes sold by TA or PNV, under the programs contained in this Agreement,
including the pre-paid phone cards, recharge, fleet services, public internet
access services or Frequent Fueler Card, shall count toward the volume schedule
set forth on Schedule 3. The charge per minute shall include all universal
service and excise tax. TA will be paid a commission for recharge phone minutes
purchased at a Truckstop based upon the difference between the retail price and
TA's cost as set forth on Schedule 3. If recharge is done by PNV's operator,
TA's commission shall be reduced by a [*] charge per recharge. PNV shall be
responsible for payment of any sales taxes which may be due on the sale of
prepaid phone cards at any particular Truckstop and PNV shall reduce the amounts
payable to TA hereunder for the amount of any such taxes paid. If sales tax is
due, PNV shall provide TA with thirty (30) days prior written notice so that the
Parties may adjust the price to customers to reflect such taxes. All amounts due
to TA hereunder shall be paid by the 25th day of each month following the month
in which such amounts are received by PNV. Subject to Section 15, delay in
payment shall be grounds for termination of this Agreement.
(b) Fleet Services. PNV has designed cable and telephone
access services to be sold to fleets and fleet drivers in three separate
packages, each containing different levels of service and pricing as discussed
below and as set forth on Schedule 4 hereto.
1. Cable Television and Telephone Access
Services. PNV shall provide the following three levels of service to be
sold to fleets and fleet drivers: (i) full access package; (ii) phone
access package; and (iii) long distance package, each as described on
-5-
<PAGE> 6
Schedule 4. These services may be sold to fleets by either: (i) TA's
fleet sales force; or (ii) PNV's fleet and telemarketing sales force.
Fleet drivers will purchase long distance minutes through PNV's voice
response unit over the telephone and shall pay for such services
through automatic payroll deduction. Pursuant to the TA-PNV Fleet Sales
Program (as defined in Section 5(b)): (i) PNV and TA shall jointly
develop marketing programs for the sale of these services to fleets and
fleet drivers; (ii) TA will add value (in the form of incentives,
discounts, etc. as determined by TA) to the services to be sold to
fleets; and (iii) TA will provide incentive compensation to its sales
force for sales of the services to fleets.
2. Financial Terms. These services shall be
provided to fleets and fleet drivers at the prices set forth on
Schedule 4. PNV shall have the right to change these prices, in its
discretion, with 30 day prior written notification to TA, based upon
market conditions; provided, however, that PNV shall not adjust such
prices pursuant to the TA-PNV Fleet Sales Program to be any less
favorable than any other fleet sales program then in effect by PNV. For
contracts obtained solely by TA or in conjunction with PNV pursuant to
TA-PNV Fleet Sales Program, TA shall, subject to Section 8(b) of this
Agreement, be paid: (i) [*]; (ii) [*]; and (iii) [*]. In addition to
other funds or value committed to the TA-PNV Fleet Sales Program by TA,
TA shall use the amounts set forth in the column labeled "Percentage of
Monthly Gross Access Revenue to Advertising and Commissions" on
Schedule 5 to provide incentives under the TA-PNV Fleet Sales Program.
PNV shall be responsible for payment of any sales taxes which may be
due and PNV shall reduce the amounts payable to TA hereunder for the
amount of any such taxes paid. If sales tax is due, PNV shall provide
TA with thirty (30) days prior written notice so that the Parties may
adjust the price to customers to reflect such taxes. All amounts due to
TA hereunder shall be paid by the 25th day of each month following the
month in which such amounts are received by PNV. Subject to Section 15,
delay in payment shall be grounds for termination of this Agreement.
(c) Coin and Coinless Phones. In accordance with Section
1(a) of this Agreement, PNV will install coin and coinless phones and enclosures
at all TA Truckstops on the following terms:
1. Equipment, Installation and Maintenance. PNV
will purchase, install and maintain all coin and coinless phones inside the
Truckstops as set forth below. Each phone shall be connected to PNV's phone
switch located inside the Truckstop. PNV will provide phone enclosures as per
TA's specifications.
a. Coin phones will consist of or
provide for: (i) either Intellicall smart phones or some other mutually
agreeable phones; (ii) a dedicated phone line for each phone where required;
(iii) an automatic pass-through to trunk lines if switch not functioning; and
(iv) 1+ calls routed through a T-1 line. The minimum standard per Truckstop
shall be 10 coinphones in an airport style sit-down booth or wall mount as per
the specifications attached hereto as Exhibit A. Actual phone quantities may
vary by site and shall be mutually agreed upon by PNV and TA.
-6-
<PAGE> 7
b. Coinless phones will be trim-line
phones (or other mutually agreed upon equipment) and have one dedicated phone
line for every two phones, unless otherwise required to comply with federal,
state or local regulations. Each phone will also have a data port. The minimum
standard per Truckstop shall be 1 phone with a data port for each driver area
restaurant booth and a quantity of cordless phones to be mutually agreed upon by
PNV and TA based upon each Truckstops' needs.
PNV will track the usage of all coin and coinless
phones and provide TA with a monthly summary commission statement, using the
format and containing the information set forth on Exhibit B hereto or such
other information as may be reasonably requested by TA from time to time. TA may
at its option (i) collect coins from the coin phones, with coin counters
supplied to each Truckstop by PNV; or (ii) cause PNV to retain a third party to
provide such service and reduce the amounts payable to TA by [*] for each visit
by such third party. Holders of TA Frequent Fueler Cards and PNV members will be
able to logon to the PNV network and place their 1-800 calls and receive
incoming calls at locations approved by PNV and TA. PNV members, TA Frequent
Fueler Card holders and TA/PNV prepaid phone card holders shall be exempt from
DAC charges from PNV provided coin and coinless phones located at the
Truckstops. The number and location of coin and coinless phones at each
Truckstop shall be mutually agreed upon by PNV and TA. [*], PNV and TA will have
exclusive rights to advertise the services provided by PNV on signage in and
around phone booths at locations where the System has been installed.
2. Financial Terms. TA shall, subject to
Section 8(b) of this Agreement, be paid [*] of gross revenues collected from:
(i) [*]; and (ii) [*]. The foregoing commission is based on the assumption that
DAC charges are [*] per call or higher. If DAC charges decrease to below [*] per
call, the Parties will [*]. PNV shall be responsible for payment of any sales
taxes which may be due and PNV shall reduce the amounts payable to TA hereunder
for the amount of any such taxes paid. If sales tax is due, PNV shall provide TA
with thirty (30) days prior written notice so that the Parties may adjust the
price to customers to reflect such taxes. All commission checks from payphone
provider should be sent to TA with summary statement included. PNV should
receive a copy of the commission check from the payphone provider with a
detailed breakdown of data for PNV to verify activity on all payphones at TA
sites. All commissions are due by the 25th day of each month, following the
commission cycle. Subject to Section 15, delays in payment shall be grounds for
termination of this Agreement. Upon termination of this Agreement at any time
prior to expiration of the Term, TA may [*]. Upon expiration of the Term, TA
shall have no liability to PNV for the equipment or enclosure costs.
(d) Frequent Fueler Card. PNV shall help implement and
support a TA Frequent Fueler Card on the following terms:
1. System and Maintenance. The Frequent Fueler
Card shall be developed by TA and within sixty (60) days of completion of the
specifications of the program PNV will integrate a long distance feature that
includes cashier based minute recharging and PNV operator assisted minute
recharging. The Frequent Fueler Card will be TA branded. PNV will
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<PAGE> 8
maintain central switching equipment with a frame relay link to the TA Frequent
Fueler Card host system. TA's customers will be able to use the same card to
participate in the frequent fueler program and to purchase rechargeable phone
time. Cards will be able to be recharged at the fuel desk, via recharge machine
or by telephone via credit card or billing company instrument. TA shall have
primary responsibility for implementing marketing and sales promotions for the
TA Frequent Fueler Card.
2. Financial Terms. TA customers will purchase
long distance minutes at normal retail rates and TA may provide additional
frequent fueler points when phone time is purchased. If recharge is done by a TA
attendant, subject to Section 8(b) of this Agreement, TA will be billed at [*]
to [*] for each minute of long distance phone time sold based upon volumes set
forth in Schedule 3. This charge will include universal service and excise tax.
If recharge is done by PNV's operator, TA will be paid a commission equal to
[*], which shall be reduced by a [*] charge per transaction at such time as the
Frequent Fueler Card is operational.
(e) Fleet In-Bound 800 Calling. Within 6 months of the
date of this Agreement, PNV will develop and provide a service which will allow
drivers to make 800# calls directly to fleets. TA shall, subject to Section 8(b)
of this Agreement, be paid [*] of [*] derived from 1-800 calls originating from
its Truckstops.
(f) PNV In-Cab Internet Access . Within eighteen months
of the date of this Agreement, PNV will be an internet access provider and will
provide such service to PNV members. All PNV locations will be upgraded to
provide capability prior to offering such services. Revenue derived from the
sale of such services at Truckstops shall, subject to Section 8(b) of this
Agreement, be allocated as follows: (i) with respect to the first months revenue
received from each subscriber, [*] to PNV and [*] TA; and (ii) with respect to
all subsequent monthly revenues received from each subscriber, [*] to PNV and
[*] to TA.
(g) Public Internet Access. Within eighteen months of the
date of this Agreement, PNV will develop and install public internet access
devices ("PIA Devices") for use inside the Truckstops. PNV shall initially
install the PIA Devices at ten (10) Truckstops and PNV shall then proceed to
install the PIA Devices at the remaining Truckstops unless either Party elects
not to proceed with such installation by providing written notice to the other
Party prior to the installation of PIA Devices at Truckstops other than the
initial ten (10) Truckstops. Truckstop customers will operate the PIA Devices by
purchasing phone minutes under one or more of the programs set forth in Sections
4(a), (b) and (d) above. As described in such Sections, TA will, subject to
Section 8(b) of this Agreement, be paid a commission based on the difference
between [*]. PNV shall be responsible for payment of any sales taxes which may
be due and PNV shall reduce the amounts payable to TA hereunder for the amount
of any such taxes paid. If sales tax is due, PNV shall provide TA with thirty
(30) days prior written notice so that the Parties may adjust the price to
customers to reflect such taxes. All amounts due to TA hereunder shall be paid
by the 25th day of each month following the month in which such amounts are
received by PNV. Subject to Section 15, delay in payment shall be grounds for
termination of this Agreement.
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<PAGE> 9
(h) 0+ Calls. TA shall contract directly with [*] or some
other provider for 0+ calls. For so long as this Agreement remains in effect, TA
shall (i) utilize [*] of the marketing allowance approved by [*] and received by
TA for joint TA and PNV marketing plans; and (ii) for so long as TA continues to
receive from [*] existing commissions and allowances, pay or cause [*] to pay
PNV [*] of the total [*] 0+ revenue generated.
5. Marketing of the Services.
(a) Except as expressly stated herein, TA and PNV shall
jointly market the Services. TA and PNV shall mutually agree upon the nature and
scope of the marketing of the Services at the Truckstop which shall include
among other things: (i) identification on bill boards where applicable; (ii)
space on placemats; (iii) access to phone booth frames; (iv) placement of
ceiling danglers per location; (v) placement of table tent cards at restaurant
tables; (vi) placement of counter cards at fuel desks; and (vii) where allowed
by TA and other relevant third parties, rigid signage at lot entrance and around
the lot. All marketing allowances shall be subject to meeting contract terms,
conditions and minimum performance requirements. PNV shall be responsible for
payment of all production costs.
(b) On or prior to February 15, 1999, PNV and TA shall
jointly devise and implement a marketing program (collectively, the "TA-PNV
Fleet Sales Program") which shall be used by PNV and TA to jointly sell the
Services to fleet owners and their professional truck drivers. Pursuant to the
TA-PNV Fleet Sales Program: (i) TA shall provide PNV with: (a) access to TA's
fleet customers through headquarter meetings, regional meetings and conferences;
and (b) meaningful assistance through TA's fleet sales organization to
effectuate the closing of the sale of the Services to TA's fleet customers; and
(ii) TA and PNV shall mutually agree to share, in the cost of promoting the
TA-PNV Fleet Sales.
6. Maintenance of the PNV Equipment and the System.
(a) Except as otherwise provided herein, PNV shall
maintain the PNV Equipment and the System. If a mechanical problem arises with
the System, TA shall notify PNV by telephone and will inform PNV of the nature
of the problem, the location of the affected Truckstop and the name of the
Truckstop General Manager to be contacted by PNV. There shall be one point of
contact for all repair calls at 1-800-347-1664 or such other 800 number as PNV
may advise TA to use from time to time.
(b) PNV will respond by telephone to the Truckstop
General Manager within [*] of the problem being reported by TA with a plan for
responding to the problem. Except as otherwise provided herein, with respect to
a Major Outage (as defined below): (i) PNV will use its best efforts to correct
such Major Outage within [*] of the problem being reported by TA; and (ii) in
any event, PNV will correct such Major Outage within [*] of the problem being
reported by TA. Except as otherwise provided herein, with respect to a Minor
Outage (as defined below), PNV will use its best efforts to correct such Minor
Outage within [*] of the problem being reported by TA and, in any event, PNV
will correct such Minor Outage within [*] of the problem being reported by TA.
PNV will be deemed to have corrected a Major Outage if the problem is
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<PAGE> 10
resolved to the extent that such problem constitutes a Minor Outage and PNV
continues to use its best efforts to correct such resulting Minor Outage as soon
as possible and, in any event, corrects such original problem within [*] of the
problem being reported by TA. All other problems which do not constitute either
Major or Minor Outages, shall be resolved by PNV pursuant to regularly scheduled
maintenance calls within ten (10) working days. TA acknowledges and agrees that
PNV may contact a designated repair technician or dispatch a designated repair
technician to complete any necessary repairs to the System.
(c) Charges for repairs will be billed directly to PNV
and paid by PNV.
(d) For the purposes of this Agreement, the term "Major
Outage" means, with respect to any class of services provided by PNV pursuant to
this Agreement (pre-paid phone cards, fleet telecom services, coin phones,
coinless phones, Frequent Fueler Card, fleet in-bound 800 calling, and internet
access and data transmission), any interruption within the control of PNV or
related to the PNV Equipment that causes a fifty percent (50%) or greater
reduction in the level of services to be provided by PNV under this Agreement of
such class at any Truckstop.
(e) For the purposes of this Agreement, the term "Minor
Outage" means, with respect to any class of services provided by PNV pursuant to
this Agreement (pre-paid phone cards, fleet telecom services, coin phones,
coinless phones, Frequent Fueler Card, fleet in-bound 800 calling, and internet
access and data transmission), any interruption within the control of PNV or
related to the PNV Equipment that causes less than a fifty percent (50%) and
greater than a ten percent (10%) reduction in the level of services to be
provided by PNV under this Agreement of such class at any Truckstop.
(f) For the purposes of this Agreement "repairs" of the
System shall include, but not be limited to, telephone service, equal access
problems, local and/or carrier lines, customer complaints, malfunctioning
equipment, condition of equipment and call quality.
(g) TA customers shall have access to a "live" customer
service representative 24 hours a day, 7 days a week in an adequate manner to
meet the customers needs.
7. Term. Subject to Section 15, the term of this Agreement, shall
be for a period of four (4) years commencing on January 27, 1999 and terminating
on January 26, 2003 (the "Term"). Ninety (90) days prior to the expiration of
the Term, PNV shall, have the right of first refusal to match other third party
proposals to provide the Services.
8. Exclusivity.
(a) During the Term, PNV shall (except for internet
access) have the exclusive right to provide the Services at the Truckstops,
provided that, TA's obligations and PNV's rights shall be subject to TA's
existing contractual obligations (or contractual obligations applicable to any
specific Truckstop acquired by TA from time to time), and provided that PNV's
equipment and services meet the standards provided in this Agreement. PNV shall
not provide the Services
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<PAGE> 11
at any truckstop owned, operated or franchised by (i) [*] prior to April 1,
1999; or (ii) [*] prior to May 1, 1999. [*]
(b) In the event that PNV enters into a contract for the
provision of any of the Services with a third party with similar terms and
conditions (with respect to, among other things, the length of contract or PNV's
purchase of equipment) and PNV pays said third party a higher percentage of
revenue relating to the provision of Services or charges any third party a lower
cost relating to the provision of the Services, the terms of this Agreement will
be modified so that the revenue split between PNV and TA or the costs charged to
TA will match such payments or charges to such third party. PNV shall provide TA
with notice of any agreement which would require an adjustment under this
Section 8(b) within ten (10) days of execution of said agreement.
9. Rights Granted to PNV. TA hereby grants and conveys to PNV,
for the Term of this Agreement, access, upon reasonable prior notice, to the
premises of each Truckstop at which the System is installed for purposes of
maintaining, repairing, replacing and operating the System and providing the
Services.
10. Representations and Warranties of PNV.
(a) PNV is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has full power
and authority: (i) to enter into this Agreement; and (ii) to carry out the other
transactions and agreements contemplated by this Agreement.
(b) The execution, delivery and performance of this
Agreement by PNV has been duly authorized by all necessary action of PNV. This
Agreement and each of the other documents to be executed and delivered by PNV
pursuant to this Agreement have been duly executed and delivered by PNV and are
the valid and binding obligations of PNV enforceable in accordance with their
respective terms, subject only as to enforceability affected by bankruptcy,
insolvency or similar laws affecting the rights of creditors generally and by
general equitable principles. The execution, delivery and performance of this
Agreement and the other documents to be executed, delivered and performed by PNV
pursuant to this Agreement will not: (i) conflict with or violate any provision
of PNV's organizational documents, or any law, ordinance or regulation or any
decree or order of any court or administrative or other governmental body which
is either applicable to, binding upon or enforceable against PNV; or (ii) result
in any breach of or default under or cause the acceleration of performance of
any mortgage, contract, agreement, indenture or other instrument which is either
binding upon or enforceable against PNV.
(c) PNV will obtain the approval, consent or waiver of
any other person or entity required for the execution, delivery or performance
of this Agreement.
(d) In the event TA's or PNV's right to use the System,
the Services or the PNV Equipment is challenged, PNV will defend and indemnify
TA, its officers, directors, shareholders, employees and agents from any and all
expenses (including reasonable attorneys'
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<PAGE> 12
fees) and damages (of whatever kind or nature) relating to the challenge of such
use. Further, in the event TA is not able to use the System or the Services
during the term of this Agreement due to any such challenge, TA may, subject to
the terms of Section 15, terminate this Agreement and receive any amounts due to
TA as of the date of termination.
(e) All of the information contained in the
representations and warranties of PNV set forth in this Agreement or in any of
the documents delivered or to be delivered herewith or after the execution
hereof as set forth in any provision of this Agreement is true, accurate and
complete.
11. Representations and Warranties of TA.
(a) TA is a corporation duly organized, validly existing
and in good standing under the laws of Delaware and has full power and
authority: (i) to enter into this Agreement; and (ii) to carry out the other
transactions and agreements contemplated by this Agreement.
(b) The execution, delivery and performance of this
Agreement by TA has been duly authorized by all necessary action of TA. This
Agreement and each of the other documents to be executed and delivered by TA
pursuant to this Agreement have been duly executed and delivered by TA and are
the valid and binding obligations of TA enforceable in accordance with their
respective terms, subject only as to enforceability affected by bankruptcy,
insolvency or similar laws affecting the rights of creditors generally and by
general equitable principles. The execution, delivery and performance of this
Agreement and the other documents to be executed, delivered and performed by TA
pursuant to this Agreement will not: (i) conflict with or violate any provision
of TA's organizational documents, or any law, ordinance or regulation or any
decree or order of any court or administrative or other governmental body which
is either applicable to, binding upon or enforceable against TA; or (ii) result
in any breach of or default under or cause the acceleration of performance of
any mortgage, contract, agreement, indenture or other instrument which is either
binding upon or enforceable against TA.
(c) TA will obtain the approval, consent or waiver of any
other person or entity required for the execution, delivery or performance of
this Agreement.
(d) All of the information contained in the
representations and warranties of TA set forth in this Agreement or in any of
the documents delivered or to be delivered herewith or after the execution
hereof as set forth in any provision of this Agreement is true, accurate and
complete.
12. Risk of Loss and Insurance; Indemnification.
(a) PNV shall bear the risk of loss and hereby
indemnifies and holds harmless TA for: (i) damage to or destruction of the PNV
Equipment and the System installed at each Truckstop, except as provided in
Section 12(b); and (ii) injury to persons or damage to property arising from the
existence, installation, operation or repair of, or otherwise in any way related
to,
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<PAGE> 13
the PNV Equipment and the System (except to the extent such damage is occasioned
by the gross negligence or willful misconduct of TA, its employees, contractors
or agents).
(b) TA shall be responsible for the maintenance, repair
or replacement of the PNV Equipment resulting from damage or destruction caused
by the gross negligence or willful misconduct of TA, its employees, contractors
or agents.
(c) Both TA and PNV shall maintain during the Term of
this Agreement (or any renewal term), at their sole cost and expense,
comprehensive public liability insurance in the minimum amount of $1,000,000
providing coverage at each Truckstop at which the Services are provided against
any claims covered under Sections 12 (a) or (b) and shall ensure that each Party
is named as an additional insured in respect of such insurance or is otherwise
covered as its interest may appear. PNV shall provide TA with evidence of
insurance and thirty (30) days prior written notice of cancellation or amendment
to PNV's insurance policies.
13. Force Majeure. Neither party shall have any liability for the
failure to perform or a delay in performing any of its obligations if such
failure or delay is the result of any legal restriction, labor dispute, strike,
boycott, flood, fire, public emergency, revolution, insurrection, riot, war,
interruption in the supply of electrical power or any other cause, not resulting
from mechanical or system failure, beyond the control of any party acting in a
reasonable business-like manner, whether similar or dissimilar to the causes
enumerated above ("Force Majeure Conditions"). If any Force Majeure Condition
occurs, the affected Party shall give immediate notice to the other Party, and,
if the Force Majeure Condition continues for ninety (90) days, such other Party
may elect, at its sole option, to terminate the rights and obligations of each
Party pursuant to this Agreement with respect to the affected Truckstop(s) by
written notice to the affected Party and, if more than ten (10) Truckstops, at
which the System has been installed pursuant to this Agreement, are subject to
any Force Majeure Conditions at any time and such conditions continue for ninety
(90) days, either Party may elect, at its sole option, to terminate this
Agreement with respect to all Truckstops by written notice to the other Party.
14. Assignment.
(a) TA may sell, assign, transfer or otherwise dispose of
its interest in one or more of the Truckstops (through a change of control, sale
of assets or otherwise) subject to the terms of Section 3(c). PNV acknowledges
that nothing in this Agreement will restrict a change of control, sale of assets
or other transactions involving TA's parent corporation.
(b) PNV may pledge its interest in this Agreement to any
bank, recognized lending or leasing institution or investor as collateral. PNV
may sell, assign, transfer or otherwise dispose of its interest in this
Agreement provided that said acquiror shall: (i) not be the owner or operator of
competing truckstops; (ii) assume all of PNV's rights and obligations hereunder;
and (iii) shall be bound by the terms of this Agreement.
15. Breach.
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(a) In the event that either party shall fail in any
material respect to perform any obligation under this Agreement, the other party
may in writing notify the non-performing party that such failure constitutes a
breach. If the breach is not remedied or cured within thirty (30) days following
receipt of the notice of breach, without limiting any other remedy which may be
available, the non-breaching party may terminate this Agreement by notice to the
breaching party. Failure to correct a Major Outage or Minor Outage will not by
itself constitute a breach of this Agreement and Sections 15(b) and (c) provides
the sole remedy with respect to any such failure to correct a Major Outage or a
Minor Outage.
(b) Subject to the terms of Section 13, if PNV fails to
correct, within the time period specified in Section 6(b) of this Agreement, [*]
Major Outages during any twelve (12) consecutive calendar months, then TA may
terminate the rights and obligations of each Party pursuant to this Agreement by
thirty (30) days prior written notice to PNV. For purposes of this Agreement, if
a Major Outage is not cured within the initial [*] period provided for in
Section 6(b), each additional [*] period during which such Major Outage is not
cured shall count as an additional Major Outage for purposes of this Section
15(b). For example, if more than 50% of any one of the Services are down at a
single Truckstop for [*], it shall count as two (2) Major Outages.
(c) Subject to the terms of Section 13, if PNV fails to
correct, within the time period specified in Section 6(b) of this Agreement, [*]
Minor Outages during any twelve (12) consecutive calendar months, then TA may
terminate the rights and obligations of each Party pursuant to this Agreement by
thirty (30) days prior written notice to PNV. For purposes of this Agreement if
a Minor Outage is not cured within the initial [*] period provided for in
Section 6(b), each additional [*] period during which such Minor Outage is not
cured shall count as an additional Minor Outage for purposes of this Section
15(c). For example, if less than 50% but more than 10% of any one of the
Services are down at a single Truckstop for [*], it shall count as two (2) Minor
Outages.
16. Ownership and Confidentiality. TA recognizes and agrees that,
except as otherwise provided herein, PNV shall, during the term of this
Agreement and thereafter, retain sole ownership of the System and the PNV
Equipment. TA recognizes the proprietary nature of the concept and the design of
the System, the PNV Equipment and the Services. Accordingly, except as otherwise
provided herein, TA and PNV agree to maintain and cause each of its employees
and agents to maintain and keep strictly confidential the terms and provisions
of this Agreement, and all confidential information it obtains or receives in
conjunction with the operation of the System, the PNV Equipment or the Services.
TA further agrees that the "Park N' View" name and logo shall be and remain the
property of PNV and all references by TA to the System or the Services shall
incorporate and/or refer to PNV by its full name (Park N' View), whether in
literature, electronic or print displays, articles, advertising, billboards,
banners or otherwise. The name, Park 'N View, is, or will be, a registered
service mark of PNV and to the extent required by PNV, TA shall execute a no
cost limited license agreement for the use of such service mark. PNV agrees to
maintain and cause its employees and agents to maintain and keep strictly
confidential all proprietary information received from TA relating to its
Truckstops, operations and customers.
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17. General Provisions.
(a) Notices. All notices required or permitted hereunder
shall be in writing and, may either be delivered by overnight courier,
transmitted by facsimile, or delivered by the United States Mail, postage
prepaid, addressed as follows:
<TABLE>
<CAPTION>
<S> <C>
To PNV: Steve Conkling
President
Park 'N View, Inc.
11711 NW 39th Street
Coral Springs, Florida 33065
Fax Number: (954) 745-7899
With a copy to: James M. O'Connell, Esq.
Kilpatrick Stockton LLP
4101 Lake Boone Trail,
Suite 400
Raleigh, North Carolina 27607
Fax Number: (919) 420-1800
To TA: President
Travel Centers of America
24601 Center Ridge Road, Suite 200
Westlake, Ohio 44145
Fax Number: (440) 808-3301
With a copy to: General Counsel
Travel Centers of America
24601 Center Ridge Road, Suite 200
Westlake, Ohio 44145
Fax Number: (440) 808-4310
</TABLE>
All notices shall be deemed delivered only upon actual receipt. Any party may
change its address for purposes of this Agreement by giving notice of such
change to the other parties pursuant to the terms of this Section 17(a).
(b) Expenses. Each party agrees to pay, without right of
reimbursement from any other party, its costs relating to the preparation of
this Agreement and the performance of its obligations hereunder, including
without limitation, fees and disbursements of counsel, accountants and
consultants employed by such party in connection herewith.
(c) Books, Records and Payments. The books and records of
TA and PNV pertinent to the revenue expenses and taxes with respect to the sale
of the Services for any calendar month shall be open for inspection and audit by
a third party representative of either TA or PNV upon five (5) business days
notice to said party. Except as otherwise provided herein, all
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monies due to or from either Party hereunder shall be paid to the receiving
Party on or before the 25th day of the month following the receipt of the same
by the paying Party.
(d) Actions; Further Assurances. Subject to the terms and
conditions of this Agreement, each party agrees to: (i) take or cause to be
taken as promptly as practicable all actions and obligations arising herein; and
(ii) do or cause to be done all things to fulfill and comply with its
obligations or the obligations of the other parties to consummate the
transactions contemplated herein.
(e) Press Releases. PNV and TA shall consult with each
other as to the form and content of all press releases and other public
disclosures of matters relating to this Agreement, the System and the Services.
Nothing in this section shall prohibit PNV or TA from making any disclosure
which its legal counsel deems necessary or advisable to fulfill such party's
disclosure obligations under applicable law. All public disclosures shall be
transmitted by telecopier to the other party or its counsel for approval prior
to publication or dissemination.
(f) Section Headings. The section headings in this
Agreement are for convenience of reference only and shall not be deemed to alter
or affect any provision hereof.
(g) Applicable Law. This Agreement shall be governed by
the laws of the State of Florida.
(h) Schedules. The Schedules attached to this Agreement
are integral parts of this Agreement and all references to this Agreement shall
include the Schedules.
(i) Modification. This Agreement shall not be modified or
amended except by an instrument in writing executed by the Parties to this
Agreement.
(j) Successors And Assigns. This Agreement shall apply
to, and be binding upon, the parties and their respective successors and
permitted assigns (as determined under Section 14).
(k) Severability. If any part or sub-part of this
Agreement is found or held to be invalid, that invalidity shall not affect the
enforceability and binding nature of any other part of this Agreement.
(l) Arbitration. Any controversy, dispute or question
arising out of, or in connection with, or in relation to this Agreement or the
interpretation, performance or non-performance or any breach thereof shall be
determined by arbitration conducted in New York, NY or the home office of the
party not bringing the claim in accordance with the then existing rules of the
American Arbitration Association. PNV and TA shall each select one arbitrator,
and the two arbitrators shall select a third with the same qualifications. Any
decision rendered shall be binding upon the Parties, however, the arbitrators
shall have no authority to grant any relief that is inconsistent with this
Agreement. The expense of arbitration shall be shared equally by the Parties.
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(m) Integration; Entire Agreement. This Agreement
(including Exhibits, Schedules, documents and instruments referenced herein)
constitutes the entire agreement among the Parties and supersedes all prior
agreements and understandings, both written and oral, among the Parties with
respect to the subject matters hereof.
(n) Counterparts. This Agreement may be executed in one
or more counterparts, each of which when so executed shall be deemed to be an
original and all of which together shall constitute one and the same instrument.
[Remainder of Page Intentionally Left Blank]
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<PAGE> 18
IN WITNESS WHEREOF, TA and PNV have caused this Agreement to be
executed pursuant to appropriate legal authority duly given, as of the day and
year first above written.
WITNESSES:
PARK 'N VIEW, INC., a
Delaware corporation
- ------------------------------
By: /s/
- ------------------------------ ---------------------------------
TA Operating Corporation, a Delaware
Corporation, d/b/a TRAVEL CENTERS
OF AMERICA
- -----------------------------
By: /s/
- ------------------------------ ---------------------------------
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<PAGE> 19
SCHEDULE 1A
LIST OF TRUCKSTOPS OWNED AND OPERATED
BY TA
<TABLE>
<CAPTION>
<S> <C> <C>
Albuquerque NM Altoona IA Amarillo TX
Ann Arbor MI Antioch TN Ashland OH
Ashland VA Atlanta GA Barkeyville PA
Baytown TX Bloomington IL Bloomsbury NJ
Brookville PA Brunswick GA Buttonwillow CA
Carney's Pt. NJ Concordia MO Council Bluffs IA
Dallas TX Dayton OH Effingham IL
Elgin IL Elkton MD Eloy AZ
Florence KY Gallup NM Gary IN
Greensboro NC Harrisburg PA Hebron OH
Hurricane WV Jeffersonville, W.OH Jeffersonville E. OH
Kingman AZ Kingsville OH Knoxville TN
Lafayette LA Lamar PA Las Cruces NM
Las Vegas NV Lodi OH London OH
Madison GA Madison WI Martinsburg WV
Matthews MO Meridian MS Mobile AL
Monroe MI Mount Vernon IL Nashville TN
North Canton OH North East PA Oak Grove MO
Ogallala NE Oklahoma City OK Oklahoma City OK
Ontario E. CA Ontario W. CA Portland OR
Redding CA Richmond VA Roanoke VA
</TABLE>
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<PAGE> 20
<TABLE>
<CAPTION>
<S> <C> <C>
Rockwall TX Salt Lake City UT Santa Rosa NM
Sawyer MI Seville OH Santa Nella CA
Seymour IN Spartanburg SC Stony Ridge OH
Tallulah LA Toledo OH Tuscaloosa AL
West Memphis AR Wheeler Ridge CA Wheeling WV
Wildwood FL Willington CT Wytheville VA
Youngstown OH
</TABLE>
-20-
<PAGE> 21
SCHEDULE 1B
LIST OF TRUCKSTOPS WHICH ARE OWNED BY TA
AND WHICH ARE OPERATED BY FRANCHISEES
<TABLE>
<CAPTION>
<S> <C> <C>
Montgomery AL Denver CO Branford CT
Milldale CT Jacksonville FL Marianna FL
St. Augustine FL Vero Beach FL Commerce GA
Jackson GA Lake Park GA Savannah GA
Clayton IN Whitestown IN Slidell LA
Saginaw MI Rogers MN Foristell MO
Grand Island NE Sparks NV Corfu NY
Manning SC Denton TX Sweetwater TX
Denmark TN Franklin TN Knoxville TN
Hudson WI
</TABLE>
<PAGE> 22
SCHEDULE 1C
LIST OF TRUCKSTOPS WHICH ARE NOT OWNED BY TA
AND WHICH ARE OPERATED BY FRANCHISEES
Walcott IA
Beto Junction KS
Mt. Vernon MO
Strafford MO
Eugene OR
Janesville WI
Baltimore MD
Albert Lea MN
Kenly NC
Breezewood PA
<PAGE> 23
SCHEDULE 2
LIST OF CURRENT PNV EQUIPMENT
Current PNV Equipment:
1. Telephone wiring, where necessary.
2. Coin phones.
3. Coinless phones.
4. Phone enclosures.
5. Wall Mounts.
6. Sit down booths.
7. Phone switch and associated data and communication devices.
8. Cordless phone equipment.
9. Internet devices.
10. Phone card machines.
11. Recharge units (which shall not be cashier assisted and which shall be
deployed by August 1, 1999, provided that, if such recharge units are not
deployed by such date, TA's commission shall not be reduced for the [*]
charge for each PNV operator assisted recharge).
<PAGE> 24
SCHEDULE 3
<TABLE>
<CAPTION>
Volume Monthly
in Minutes TA's Cost
---------- ---------
<S> <C>
Greater than [*] minutes per month [*] per minute
[*] minutes per month [*] per minute
[*] minutes per month [*] per minute
[*] minutes per month [*] per minute
[*] minutes per month [*] per minute
[*] minutes per month [*] per minute
[*] minutes per month [*] per minute
Less than [*] minutes per month [*] per minute
</TABLE>
Notwithstanding the foregoing, until December 31, 1999, TA's cost will be [*]
per minute regardless of volume. After December 31, 1999, the foregoing volume
Schedule shall apply.
After December 31, 1999, TA may elect to: (i) have PNV charge TA [*] per minute;
and (ii) reconcile on a quarterly basis any amounts due to or from PNV based
upon the actual cost per minute based upon the foregoing volume schedule.
<PAGE> 25
SCHEDULE 4
Fleet Service Package Options
1. Full Fleet Program
Full Program: $25.00 per driver monthly
Services include: full phone access with free 800 calls, free local
calls, free voice mail messaging, free incoming calls, wake up call
service, internet access, faxing capability, sixty (60) minutes long
distance service and unlimited cable access.
2. Fleet/Driver Partnership Program: Two options:
a. Fleet Phone and cable package: $20.00 per driver monthly
Services include: full phone services with free 800 calls, free local
calls, free voice mail messaging, free incoming calls, wake up call
service, internet access, faxing capability and unlimited cable access
(does not include 60 free minutes of long distance).
b. Fleet Full Phone Package: $15.00 per driver monthly
Services include: full phone services as listed above: no cable access,
Drivers are encouraged by fleet and PNV campaign to add cable service
through payroll deduction at $20.00 per month. Fleet receives $5.00
rebate for each driver enrolled with cable service making final cost
$10.00 per driver.*
3. Fleet Access Program:
Fleet Access Program: $5.00 per driver monthly
Services include: phone service with free 800 calls, free local calls,
free voice mail messaging, free incoming calls, wake up call service,
internet access, faxing capability, no long distance minutes: no cable
access, Drivers encouraged by fleet and PNV campaign to add cable
service through payroll deduction at $20.00 per month. Fleet receives
$5.00 rebate for each driver enrolled with cable service making final
cost zero per driver.*
*Per driver that adds cable service to membership, 800 calls are made without
DAC charge, Voice mail is accessible from any phone, Internet service if driver
has ISP account, Fax capability when vehicle has facsimile machine.
<PAGE> 26
SCHEDULE 5
<TABLE>
<CAPTION>
Percentage of
Percentage of Monthly Gross Access
Aggregate Monthly Gross Access Revenue to Advertising/
Number of Drivers Revenue to TA Commissions
<S> <C> <C>
[*] [*] [*]
[*] [*] [*]
[*] [*] [*]
</TABLE>
<PAGE> 27
EXHIBIT A
Specifications for Phone Enclosures
[There appears here a schematic and related specifications for the layout and
production of phone enclosures.]
<PAGE> 28
EXHIBIT B
Format of Monthly Commission Report
[There appears here a format for the monthly commission reports
to be delivered to TA by the Company, including columns for itemized revenue
and commission information for various sites.]
<PAGE> 1
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Agreement ("Agreement") is made and entered into effective the 1st
day of March, 1999, by and between Park `N View, Inc., a Delaware corporation
(the "Company") and Robert P. May (the "Executive").
WHEREAS, the Company is engaged in the business of developing and
providing telecommunications, data transmission, internet, cable television and
other services to truckstops, truckdrivers and truck fleet owners; and
WHEREAS, the Executive desires to be employed by the Company in a
position of trust and confidence; and
WHEREAS, the Executive acknowledges that this Agreement and the
benefits described herein are valuable consideration to which he is not
otherwise entitled.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Executive and the Company agree as follows:
1. Term of Agreement. The term of this Agreement shall commence
as of the date and year first above written (the "Effective Date") and shall
remain in effect for the duration of the Executive's employment with the Company
(hereinafter "Term of Agreement"). The Executive's employment with the Company
and the Term of Agreement shall continue until terminated with or without cause
by either party immediately upon giving the other party written notice thereof,
or upon verbal notice confirmed thereafter in writing. Nothing herein shall be
understood as modifying or otherwise altering the Executive's at-will
relationship or in any other way creating a contract of employment with the
Executive for any stated term.
2. Position and Responsibilities. The Executive shall be employed
as Chief Executive Officer of the Company and shall be nominated to serve as
member of the Board of Directors of the Company (the "Board"). The Executive
agrees that the performance of the obligations of his position shall include,
without limitation, direction of the day-to-day operations of the Company as
well as the performance of those duties and responsibilities, commensurate with
Executive's position as Chief Executive Officer, as the Board shall from time to
time delegate to Executive on such terms and conditions, and subject to such
restrictions, as the Board reasonably may from time to time impose. While so
employed, the Executive agrees to devote his full working time and attention to
carrying out his duties and responsibilities under this Agreement and shall use
his best efforts, skills and abilities to further the interests of the Company.
While employed by the Company,
<PAGE> 2
the Executive may not work for any other entity, in any capacity, without the
prior express written consent of the Company. The Executive agrees to comply
with all policies, standards and regulations of the Company now existing or
hereafter promulgated.
3. Compensation and Related Matters.
(a) Salary. During the Term of Agreement, the Company
shall pay to the Executive a salary at a rate of Two Hundred Seventy-Five
Thousand Dollars ($275,000.00) per annum in equal installments on the fifteenth
and last day of each month in arrears. This salary may be increased from time to
time by the Company in accordance with normal business practices of the Company.
The Compensation Committee of the Board shall review the Executive's salary and
bonus compensation on an annual basis.
(b) Bonus. For each fiscal year during the Term of
Agreement, the Executive shall be eligible for an incentive bonus for such
fiscal year (a "Bonus") upon satisfaction (as determined by the Compensation
Committee of the Board in its discretion) of the goals and objectives specified
by the Board for this purpose pursuant to Section 3(c). The Executive's Bonus
shall be targeted at fifty percent (50%) of his Base Salary (as defined in
Section 4(f) below) but may be increased or decreased by the Compensation
Committee based upon Executive's achievements relative to the established goals
and objectives. For the period beginning on the Effective Date and ending June
30, 1999, the Executive shall be eligible for such Bonus as may be recommended
by the Compensation Committee of the Board and approved by the Board.
(c) Periodic Reviews. Within ninety (90) days of the
Effective Date, the Board shall meet with the Executive to set goals and
objectives for the Executive's performance under this Agreement, including for
the remainder of the fiscal year ending June 30, 1999. Thereafter, the Board
shall conduct annual performance reviews with Executive, to be scheduled within
thirty (30) days of the Company's receipt of audited fiscal year end financial
statements, to set goals and objectives for the performance of the Executive
under this Agreement for the ensuing fiscal year.
(d) Stock Options. The Company shall grant a nonqualified
stock option to the Executive substantially in the form of the nonqualified
stock option award agreement of even date herewith.
(e) Temporary Living and Moving Expenses. The parties
acknowledge that the Executive may continue to maintain his home and family in
New York for some time after the Executive commences performance under this
Agreement; however, he shall relocate to South Florida no later than September
1, 2000. To assist the Executive with this transition, the Company shall
reimburse the Executive for reasonable temporary living expenses for the
Executive in Florida for up to six (6) months after the Effective Date, provided
that such expenses are incurred and accounted for in accordance with the
policies and procedures established by the
2
<PAGE> 3
Company and do not exceed, on average, $3,500 per month. The Company shall also
reimburse the Executive for air travel to visit his family in New York during
the period, up to six (6) months, that the Executive maintains his home in New
York. Upon relocation, the Company will reimburse the Executive for reasonable
moving expenses, closing costs on the sale of Executive's home in New York, and
closing costs associated with the purchase of a home in South Florida. All such
reimbursements shall be grossed up as necessary to compensate the Executive for
any adverse tax consequence to the Executive.
(f) Business Expenses. During the Term of Agreement, the
Executive shall be entitled to receive prompt reimbursement for all reasonable
business expenses incurred by the Executive in performing services hereunder,
including travel expenses while away from home on business, provided that such
expenses are incurred and accounted for in accordance with the policies and
procedures established by the Company.
(g) Split Dollar Life Insurance Arrangement. During the
Term of Agreement, the Company shall make premium payments of up to $2,083.33
per month under the split dollar insurance policy maintained by Executive.
(h) Stock Purchase. The Executive shall purchase 23,000
shares of Series C 7% Cumulative Convertible Preferred Stock of the Company (the
"Shares") at $8.00 per share for an aggregate purchase price of $184,000.
Executive shall pay the purchase price for the Shares as follows: (i) $92,000
pursuant to a full recourse promissory note, having a term of four (4) years,
bearing interest at the rate of 6% per annum compounded annually, allowing for
prepayment without penalty and requiring payment of the full principal balance
and all accrued interest in one lump sum on the last day of such four (4) year
term; and (ii) $92,000 pursuant to monthly payments by Executive to the Company
of $13,000 at the end of each month for the first seven (7) months of the Term
of Agreement with a final payment of $1,000 at the end of the eighth month. If
Executive's employment is terminated for any reason prior to payment in full of
amounts due to the Company pursuant to Section 3(h)(ii) above, Executive shall
pay the outstanding balance to the Company within thirty (30) days of
termination.
(i) Vacation. The Executive shall be entitled to up to
twenty (20) business days paid vacation in each full calendar year and accrued
in accordance with Company policy. Any vacation days accrued, but not used, in
any calendar year shall be forfeited without payment therefor. The Executive
shall be entitled to a pro rata portion of his vacation entitlement for the
calendar year 1999.
(j) Deferred Compensation Plan. The Company shall
establish and maintain a nonqualified deferred compensation plan pursuant which
Executive may elect to defer amounts in excess of his permissible contributions
to the Company's 401(k) plan.
3
<PAGE> 4
(k) Life Insurance. Within sixty (60) days of the
Effective Date, the Company shall purchase a life insurance policy on the life
of the Executive with benefits payable to the Company. The Company shall pay for
a physical examination of the Executive in connection with this policy.
(l) Other Benefits. The Executive shall be eligible to
participate in the Company's retirement and welfare benefit plans under the
terms and conditions established by the applicable plan documents.
4. Payment to the Executive Upon Termination of Employment.
(a) Termination With and Without Cause. The Company shall
have the right to terminate the Executive's employment at any time with Cause
(as defined in Section 4(f) below) or without Cause (as defined in Section 4(f)
below).
(b) Termination without Cause - General. If the Company
terminates the employment of the Executive without Cause (as defined in Section
4(f) below) other than as described in subsection (c) below, the Term of
Agreement shall terminate immediately thereafter and:
(i) the Company shall pay the Executive the
portion of his Base Salary (as defined in Section 4(f) below) in effect at the
time of termination as he may be entitled to receive for services rendered prior
to the date of such termination;
(ii) the Company shall pay the Executive for any
accrued but unused vacation;
(iii) subject to Section 5, the Company shall pay
the Executive, at the end of each month for the first six (6) months following
the date on which the Executive executes the release described in Section 5
below (the "Release Date"), an amount equal to one-twelfth (1/12) of his Base
Salary (as defined in Section 4(f) below), provided, however, nothing herein
shall be construed to entitle the Executive to more than one payment pursuant to
Sections 4(b)(iii) and 4(c)(iii); and
(iv) subject to Section 5, the Company shall make
premium payments of up to $2,083.33 per month, under the split dollar insurance
policy maintained by Executive, for the first six (6) months following the
Release Date.
(c) Termination Without Cause - Change in Control. If the
Company terminates the employment of the Executive without Cause (as defined in
Section 4(f) below) within eighteen (18) months following a Change of Control
(as defined in Section 4(f) below), the Term of Agreement shall terminate
immediately thereafter and:
4
<PAGE> 5
(i) the Company shall pay the Executive the
portion of his Base Salary (as defined in Section 4(f) below) in effect at the
time of termination as he may be entitled to receive for services rendered prior
to the date of such termination;
(ii) the Company shall pay the Executive for any
accrued but unused vacation;
(iii) subject to Section 5, the Company shall pay
the Executive, at the end of each month for the first eighteen (18) months
following the Release Date, an amount equal to one-twelfth (1/12) of his Base
Salary (as defined in Section 4(f) below), and, on the first regularly-scheduled
payroll date following the Release Date, an amount equal to any bonus paid to
the Executive in the previous year; provided, however, nothing herein shall be
construed to entitle the Executive to more than one payment pursuant to Sections
4(b)(iii) and 4(c)(iii); and
(iv) subject to Section 5, the Company shall make
premium payments of up to $2,083.33 per month, under the split dollar insurance
policy maintained by Executive, for the first eighteen (18) months following the
Release Date.
(d) Termination for Death, Retirement or Disability. If
the Executive's employment is terminated by the death, Disability or Retirement
(as hereinafter defined) of the Executive, the Term of Agreement shall terminate
immediately thereafter and the Company shall pay the Executive or his
beneficiary such compensation as is set forth in Sections 4(b)(i) and 4(b)(ii)
herein. In addition, in the event the Executive's employment is terminated by
the death or Disability of the Executive, the Company shall pay the Executive or
his beneficiary an amount equal to the Bonus paid to the Executive in the
preceding fiscal year, prorated by a fraction, the numerator of which is the
number of days of the fiscal year until termination by death or Disability and
the denominator of which is 365.
(e) Voluntary Termination by the Executive or Termination
for Cause. If the Executive voluntarily terminates his employment and this
Agreement, or the Company terminates the Executive's employment for Cause (as
defined in Section 4(f) below), the Term of Agreement shall terminate
immediately thereafter and the Company shall pay the Executive or his
beneficiary such compensation as is set forth in Sections 4(b)(i) and 4(b)(ii)
herein.
(f) Definitions.
(i) Base Salary. For purposes of this Agreement,
the term "Base Salary" shall mean the Executive's annualized rate of base pay,
excluding bonuses, stock options or any other sums.
(ii) Cause. For purposes of this Agreement, the
term "Cause" shall be limited to the following events: (i) theft, embezzlement
or other similar act by the Executive of any tangible or intangible asset of the
5
<PAGE> 6
Company or any customer, supplier or investor of the Company if, in the good
faith determination of the Board, such act causes or is likely to cause material
damage to the business or reputation of the Company; (ii) commission of any
other criminal act by the Executive (whether or not the Executive is prosecuted
and convicted) if, in the good faith determination of the Board, such act causes
or is likely to cause material damage to the business or reputation of the
Company; or (iii) willful failure by the Executive to follow the instructions of
the Board, to the extent such instructions are reasonably related to the
business of the Company, are given in good faith to promote the interest of the
Company, would not require the Executive to commit any illegal act and are not
given to provide the Company with cause for terminating the Executive, and if
such failure has continued for thirty (30) days after Executive has been
notified in writing by the Company of the nature of Executive's failure to
follow such instructions. This definition of Cause shall not create in the
Executive any right to employment or cause of action on account of termination
of the Executive's employment with the Company without Cause.
(iii) Change in Control. For purposes of this
Agreement, the term "Change in Control" shall be deemed to have occurred if:
(i) Tender Offer or Acquisition. Any
"person" as defined in section 3(a)(9) of the Securities Exchange Act of 1934
(the "Act"), including a "group" (as that term is used in sections 13(d)(3) and
14(d)(2) of the Act), but excluding the Company and any employee benefit plan
sponsored or maintained by the Company, including any trustee of such plan
acting as trustee, who:
(A) makes a tender or exchange
offer for any shares of the Company's stock pursuant to which at least fifty
percent (50%) of the Company's stock is purchased; or
(B) together with its
"affiliates" and "associates" (as those terms are defined in Rule 12b-2 under
the Act) becomes the "beneficial owner" (within the meaning of Rule 13d-3 under
the Act) of at least fifty percent (50%) of the Company's stock; or
(ii) Merger or Consolidation. The
happening of any one (1) of the following events: (i) the dissolution or
liquidation of the Company; (ii) a reorganization, recapitalization, merger or
consolidation involving the Company, unless (A) the transaction involves only
the Company and one or more of the Company's parent corporation and wholly-owned
(excluding interests held by employees, officers and directors) subsidiaries; or
(B) the shareholders who had the power to elect a majority of the board of
directors of the Company immediately prior to the transaction have the power to
elect a majority of the board of directors of the surviving entity immediately
following the transaction; (iii) the sale of all or substantially all of the
assets of the Company to another company, person or business entity; or (iv) an
acquisition of Company stock, unless the shareholders who had the power to elect
a majority of the board of directors of the Company immediately prior to the
acquisition have the power to elect a majority of the board of directors of the
Company immediately following the transaction.
6
<PAGE> 7
(iv) Disability. For purposes of this Agreement,
the Executive's employment with the Company shall be deemed to have terminated
on account of "Disability" on the date on which the Executive is eligible to
receive, and commences receipt of, benefits under the Company's program of
long-term disability insurance.
(v) Retirement. For purposes of this Agreement,
the term "Retirement" means the Executive's election to separate from service
with the Company upon or after having attained the normal retirement age
specified in the Company's tax-qualified retirement plan.
5. Condition on Payment of Benefits: The Executive agrees that he
shall be entitled to payments and benefits under the terms of Sections
4(b)(iii), 4(b)(iv), 4(c)(iii) and 4(c)(iv) above, as applicable, only if he
executes a complete and general release in a form substantially comparable to
the release set forth in Exhibit A hereto and incorporated herein by reference
or in such other form as is determined to be necessary or desirable by the
Company in its discretion, which release shall at least contain a release by the
Executive and any beneficiary of the Executive entitled to receive all or any
portion of the benefits specified in such Sections of any claims arising from
the Executive's employment or associations with the Company or otherwise
existing against the Company and its officers, directors, agents, employees,
shareholders, and representatives at the time of execution of the release.
Notwithstanding any other provision set forth herein, if the Executive elects
not to execute such a general release, then the Executive's benefits under
Sections 4(b)(iii) and 4(c)(iii) above, as applicable, shall consist solely of
an amount equal to one-twelfth (1/12) of the Executive's Base Salary (excluding
commissions) in effect at the time of the termination.
6. Representations.
(a) The Executive warrants and represents that the
Executive's performance of all of the terms of this Agreement and as an employee
does not and will not breach any agreement to keep in confidence proprietary
information acquired by the Executive in confidence or in trust prior to the
Executive's employment by the Company. The Executive represents that the
Executive has not entered into, and agrees not to enter into, any agreement
either oral or written in conflict herewith.
(b) The Executive warrants and represents that the
Executive has not brought and will not bring with the Executive to the Company,
or use in the performance of the Executive's responsibilities for the Company,
any materials or documents of a former employer which are not generally
available to the public, unless the Executive has obtained written authorization
from the former employer or other owner for their possession and use and
provided the Company with a copy of such authorization.
7
<PAGE> 8
(c) The Executive understands that during the Executive's
employment for the Company the Executive is not to breach any obligation of
confidentiality that the Executive has to a former employer or any other person
or entity.
7. Other Agreements. This Agreement supersedes all prior
agreements and understandings, oral or written, between the Company and the
Executive with respect to the subject matter hereof.
8. Amendment. No change, modification, termination or attempted
waiver of any of the provisions of this Agreement shall be binding upon any
party hereto unless reduced to writing and signed by the party against whom
enforcement is sought.
9. Assignment. The Company shall have the right to assign this
contract to a successor or surviving entity, and all covenants and agreements
hereunder shall inure to the benefit of and be enforceable by or against its
successors and assigns. The Executive's obligations under this Agreement shall
not be transferable by assignment or otherwise by the Executive and any attempt
to do any of the foregoing shall be null and void.
10. Counterparts. Any number of counterparts of this Agreement may
be signed and delivered, each of which shall be considered an original and all
of which, together, shall constitute one and the same instrument.
11. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, without reference
to its conflict of law provisions.
12. Venue. Any litigation under this Agreement may be brought by
the Company in the State of Florida, notwithstanding that the Executive is not
at that time a resident of the State of Florida and cannot be served process
within that state. The Executive hereby irrevocably consents to the jurisdiction
of the courts of Florida (whether federal or state courts) over his or her
person.
13. Binding Effect. The provisions of this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
heirs, assigns and successors in interest.
14. Withholding of Taxes. The Company may withhold from any
payments made under this Agreement all federal, state, city, or other taxes as
shall be required pursuant to any law, regulation or ruling.
15. Headings. The headings contained in this Agreement are for
reference purposes only and shall not be deemed interpretation of this
Agreement.
16. Representation. The Executive represents and warrants that the
performance of the Executive's duties under this Agreement, and the execution of
this Agreement by him, will not
8
<PAGE> 9
violate any agreement between the Executive and any other person, firm,
partnership, Company or any other organization. The Executive represents and
warrants that he has consulted with and received advice from his own counsel in
electing to enter into this Agreement.
17. Notices. Any notice given to either party hereto shall be in
writing and shall be deemed to have been given when delivered personally or sent
by certified or registered mail, postage prepaid, return receipt requested, duly
and properly addressed to the party concerned at the address indicated below or
to such changed address as party may subsequently give notice of:
If to the Company:
11711 NW 39th Street
Coral Springs, Florida 33065
If to the Executive:
to Executive's last known address as shown on the Company's
records.
18. Survival. The Executive and the Company agree that the
provisions of Sections 4-18 herein shall survive the termination of this
Agreement and the termination of the Executive's employment hereunder.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
THE EXECUTIVE:
ROBERT P. MAY
/s/ Robert P. May (Seal)
---------------------------
THE COMPANY:
PARK `N VIEW, INC.
By: /s/ Ian Williams
------------------------
Ian Williams
10
<PAGE> 11
EXHIBIT A
T0 EMPLOYMENT AGREEMENT
CONFIDENTIAL SETTLEMENT AGREEMENT AND GENERAL RELEASE
This Confidential Settlement Agreement and General Release is entered
into by and between Robert May, a resident of ______________ , _____________
(the "Executive") and Park `N View, Inc., a Delaware corporation (the
"Company").
W I T N E S S E T H:
WHEREAS, Executive was employed by the Company from March 1, 1999 until
_______________;
WHEREAS, Executive's employment with the Company terminated on
___________;
WHEREAS, the parties desire to set forth the terms and conditions of
Executive's separation from the Company; and
WHEREAS, the parties desire to settle fully, finally and on a
confidential basis all matters in dispute between them and relating to the
employment and termination of Executive, without any admission of liability.
NOW, THEREFORE, in consideration of the premises and mutual promises
herein contained in this Agreement, and other valuable consideration to which
Executive is not otherwise entitled, the receipt and sufficiency of which is
hereby acknowledged, it is agreed by the parties as follows:
1. Termination of Employment. Executive agrees that his
employment with the Company ended or will end on ______________ (the
"Termination Date"), and waives all rights to reemployment or reinstatement from
or after that date.
2. Consideration. Once this Agreement is executed by Executive,
returned to the Company and becomes effective, and subject to the restrictions
set forth in Section 8 of this Agreement, the Company shall pay the Executive in
exchange for this release [insert description of specific payments and/or
benefits to be provided]. All payments will be made less all FICA and other
required withholdings. Executive warrants that all monies and/or benefits
payable under this Agreement are monies and/or benefits to which Executive is
not otherwise entitled.
3. No Other Entitlements. Except for the compensation and monies
expressly set forth in Section 2 above, Executive acknowledges that he is not
entitled to any other compensation, monies or benefits from the Company, and
Executive hereby releases the Company
11
<PAGE> 12
of and from any obligations to make any other payment or provide any other
benefit, and Executive waives all rights to said payments or benefits.
4. Relationship to Other Agreements. Executive will adhere to and
honor all obligations to the Company set forth in that certain Confidentiality
Agreement dated March 1, 1999. Executive warrants that the Company has satisfied
in full all of its obligations set forth in the Employment Agreement dated March
1, 1999 and that the Company has no further obligations thereunder.
5. Confidentiality. Except with the Company's express prior
written consent or as required by law, Executive shall keep any information
relating to the negotiations leading up to this Agreement, the terms of this
Agreement, and the existence of this Agreement strictly confidential, and shall
not disclose this information to any person other than Executive's immediate
family and legal and financial advisors who will agree to keep such matters
confidential.
6. Covenant Not to Sue and Release.
(a) Executive agrees that he will not file any claims,
complaints, charges or lawsuits against the Released Parties (as defined below)
about anything which has occurred up to and including the date he executes this
Agreement. In addition, except for any vested tax-qualified retirement plan
benefits Executive may have (which are not released by this Agreement) and in
further consideration of the benefits the Company has agreed to provide
Executive hereunder, Executive, for himself and on behalf of his heirs,
representatives, administrators, executors, successors and assigns, hereby
irrevocably and unconditionally releases, acquits, and forever discharges the
Company and each of its present and former divisions, parent companies,
subsidiaries, affiliates, predecessors, successors and assigns, together with
all present and former agents, shareholders, directors, officers, employees,
owners, representatives and attorneys of all such entities or persons and all
persons acting by, through, under or in concert with any of them (hereinafter
collectively referred to as the "Released Parties"), from any and all charges,
complaints, claims, lawsuits, defenses, liabilities, obligations, promises,
agreements, controversies, damages, actions, causes of action, suits, rights,
demands, costs, losses, debts and expenses (including attorney's fees and costs
actually incurred), of any nature whatsoever, known or unknown (hereinafter
"Claim" or "Claims"), which Executive now has, has had, or may hereafter claim
to have had against each or any of the Released Parties for personal injuries,
back pay, losses or damage to real or personal property, economic loss or damage
of any kind, breach of contract (express or implied), defamation, breach of any
covenant of good faith (express or implied), tortious interference with
contract, wrongful termination, business or personal tort, misrepresentation, or
any other losses or expenses of any kind (whether arising in tort, contract or
by statute) resulting from or arising out of any matter, act, omission, cause or
event whatever that has previously occurred. Executive understands that by
signing this Agreement and accepting the consideration hereunder, he is waiving
any right to pursue any claim against any of the Released Parties in any state
or federal court or before any state or federal agency including, for example,
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the Equal Employment Opportunity Commission or the Department of Labor, for back
pay, severance pay, liquidated damages, compensatory damages, punitive damages,
or any other losses or other damages to Executive or his property resulting from
any claimed violation of state or federal law, including, for example (but not
limited to), claims arising under Title VII of the Civil Rights Act of 1964, the
Age Discrimination In Employment Act of 1967, as amended, the Equal Pay Act, the
Civil Rights Act of 1991, the Americans With Disabilities Act, the Employee
Retirement Income Security Act of 1974, as amended, the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, the Family and Medical Leave Act
of 1993, and claims under any other federal, state and local laws. This
Agreement does not, however, waive rights or claims that may arise after the
date Executive signs it below.
(b) Executive acknowledges that this release applies both
to known and unknown claims that may exist between Executive and the Released
Parties. Executive expressly waives and relinquishes all rights and benefits
which he may have under any state or federal statute or common law principle
that would otherwise limit the effect of this Agreement to claims known or
suspected prior to the date Executive executes this Agreement, and does so
understanding and acknowledging the significance and consequences of such
specific waiver.
(c) Thus, for the purpose of implementing a full and
complete release and discharge of the Released Parties, Executive expressly
acknowledges that this Agreement is intended to include in its effect, without
limitation, all Claims which Executive does not know or suspect to exist in his
favor at the time of execution hereof, and that this Agreement contemplates the
extinguishment of any such Claim or Claims.
(d) Executive agrees to execute at the Company's request,
such additional waivers, releases, indemnities or other instruments as the
Company shall deem necessary to effectuate the intent of this Section.
(e) Executive specifically agrees that if he files or
asserts any claim against the Released Parties for anything either occurring
before or existing as of the date of execution of this Agreement, for any reason
other than claims for vested pension benefits or for the Company's violation of
this Agreement, Executive will repay all compensation and monies Executive has
received pursuant to this Agreement.
7. Representations and Indemnification.
(a) Executive represents that, as of the date of
execution of this Agreement, he has not filed with any agency or court any
complaints or lawsuits against any of the Released Parties.
(b) Executive agrees that he will not, directly or
indirectly, institute, be a party to, or participate in, any action, lawsuit or
administrative proceeding against any of the Released Parties, arising from any
claim of any type or nature either occurring before or existing as of the date
of execution of this Agreement.
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(c) Executive agrees to indemnify the Released Parties
from all claims, including all attorneys' fees, costs and expenses arising out
of his breach of this Agreement or any misrepresentation of fact made by
Executive which is contained in or made the basis of this Agreement.
8. Nondisparagement. Executive understands that his entitlement
to the payments agreed to above in Section 2 are conditioned on Executive's
continued support of the Company. The Company and the Employee each agree not to
contact or communicate with any media, nor will the Company (except in the
ordinary course of business) or the Employee contact any of the Company's
employees (former or current), regarding the Employee's employment or separation
from the Company. Furthermore, the Company and the Executive each agree not to
make any oral or written statement or take any other action which (i) disparages
or criticizes the other or, in the case of statements by the Employee, the
Company's employees, agents, directors, representatives or officers, including
their management or practices, (ii) damages the good reputation of the other, or
(iii) in the case of statements by the Employee, impairs the Company's normal
operations.
9. Cooperation. Executive agrees to reasonably cooperate with the
Company at a mutually convenient time and place, in assisting in the defense of
any existing or future charges, claims, demands, complaints or lawsuits filed
against the Company, any of its related companies or subsidiaries or parent
company, that involve facts or decisions in which Executive had input or
knowledge.
10. Return of Company Property. Prior to any payment becoming due
under this Agreement, Executive will return all property of the Company,
including, without limitation, all reports, files, memoranda, records, software,
credit cards, card-key passes, door, file, vehicle and other keys, computers,
computer access codes, disks and instructional manuals, calculators and other
physical or personal property which have been provided for his use in connection
with his employment with the Company or he has in his possession, control or
custody.
11. Notice to Consult with an Attorney. Executive is advised by
the Company that this Agreement affects important rights, and includes a release
of any and all claims arising out of any alleged violation of Executive's rights
while employed with the Company, including, but not limited to, any claims
Executive may have under the Age Discrimination in Employment Act of 1967, as
amended, 29 U.S.C. ss. 621, et seq. Because this Agreement affects important
rights, Executive is advised to consult with an attorney prior to executing this
Agreement.
12. Time for Review. Executive is advised that he has twenty-one
(21) days [or 45 days, as applicable] to fully review and consider whether or
not he wishes to agree to all the terms and conditions of this Agreement and to
advise the Company of the same. Executive is advised that should Executive wish
to enter into this Agreement, the Agreement may not be executed until the
Termination Date.
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<PAGE> 15
13. Revocation. Executive is advised that should he sign this
Agreement, accepting its terms and conditions, he will have a period of seven
(7) days from the date of his acceptance to change his mind and revoke this
Agreement. If Executive decides to revoke this Agreement, then he should give
written notice to the Company. The other terms and conditions contained herein
will not be enforceable by the parties hereto until the expiration of this seven
(7) day period.
14. No Admission of Liability or Wrongdoing. This Agreement will
not be used or construed by any person or entity as an admission of liability or
finding that Executive's rights were in any way violated by the Company and this
Agreement may not be offered or received in evidence in any action or proceeding
as an admission of liability or wrongdoing on the part of the Company. Executive
understands and agrees that the consideration received herein is accepted by him
as full and complete settlement and compromise of any and all claims, asserted
or unasserted, and the payment of such consideration is not an admission of
liability by the Company.
15. Entire Agreement. This Agreement contains and comprises the
entire agreement, and understanding of the parties with respect to the subject
matter, and there are no agreements or understandings other than those contained
herein. Further, this Agreement is intended to be a binding contract among the
parties hereto and shall not be modified, except by writing and signed by both
Executive and the Company.
16. Severability. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any provision (or part
thereof) of this Agreement shall in no way affect the validity or enforceability
of any other provisions (or remaining part thereof).
17. Successors. This Agreement shall be binding upon and inure to
the benefit of Executive, his assigns, heirs, executors, administrators,
representatives, as well as the predecessors, successors, purchasers and assigns
of the Company. Executive may not assign any of his rights or delegate any of
his duties under the Agreement.
18. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida, without reference
to its conflict of law provisions.
19. Venue. Any litigation under this Agreement may be brought by
the Company in the State of Florida, notwithstanding that the Executive is not
at that time a resident of the State of Florida and cannot be served process
within that state. The Executive hereby irrevocably consents to the jurisdiction
of the courts of Florida (whether federal or state courts) over his or her
person.
20. KNOWING AND VOLUNTARY AGREEMENT. EXECUTIVE ACKNOWLEDGES THAT
EXECUTIVE FULLY AND COMPLETELY UNDERSTANDS THE TERMS AND CONDITIONS OF THIS
AGREEMENT AND HAS VOLUNTARILY AND KNOWINGLY AGREED TO SUCH TERMS AND CONDITIONS,
INCLUDING ALL
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RELEASES OF CLAIMS EXECUTIVE MAY HAVE AGAINST THE COMPANY, IN EXCHANGE FOR
VALUABLE CONSIDERATION THAT EXECUTIVE IS NOT OTHERWISE ENTITLED TO RECEIVE.
IN WITNESS WHEREOF, the parties have hereto executed this Confidential
Settlement Agreement and General Release, this the _____ day of__________.
The Executive:
(SEAL)
----------------------------
The Company:
PARK `N VIEW, INC.
By:
-------------------------
16
<PAGE> 1
EXHIBIT 10.3
NONQUALIFIED STOCK OPTION AWARD AGREEMENT
UNDER THE PARK 'N VIEW, INC.
STOCK OPTION PLAN
THIS AWARD AGREEMENT is made and entered into as of this 3rd day of
March, 1999 (the "Grant Date"), by and between Park `N View, Inc., a Delaware
corporation (the "Company"), and Robert P. May (the "Eligible Participant").
WHEREAS, the Eligible Participant is a valuable and trusted employee to
the Company; and
WHEREAS, the Board considers it desirable and in the best interests of
the Company that the Eligible Participant be given an opportunity to acquire a
proprietary interest in the Company as an incentive to advance the interests of
the Company; and
WHEREAS, on the Grant Date, the Board granted the Eligible Participant
a nonqualified stock option to purchase shares of the common stock of the
Company (the "Stock" or the "Common Stock"), in accordance with the Park `N
View, Inc. Stock Option Plan adopted by the Company on August 26, 1996 and
approved by the shareholders of the Company (the "Plan") (capitalized terms used
herein which are not otherwise defined herein shall have the meanings ascribed
to them under the Plan); and
WHEREAS, this Award Agreement memorializes the grant of such
nonqualified stock option to the Eligible Participant.
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, it is agreed by and between the parties as follows:
1. Grant of Nonqualified Stock Option. The Company hereby grants
Eligible Participant a nonqualified stock option (the "Option") to purchase
567,083 shares of Stock (the "Shares"), at the per Share Purchase Price (as
defined in Section 6 below), in the manner and subject to the terms and
conditions hereinafter provided.
2. Time of Exercise of Option; Vesting. Subject to the termination
provisions set forth in Section 5 below, to the extent the Option has vested as
provided below, it may be exercised, in whole or in part, at any time and from
time to time but not later than the seventh anniversary of the Grant Date (the
"Exercise Period"). Any unvested portion of the Option may not be exercised. On
the first day of every calendar month commencing on April 1, 1999 and
<PAGE> 2
ending on February 1, 2003, the Option shall vest and become exercisable with
respect to 2.0833% of the Shares, and on March 1, 2003, the Option shall vest
and become exercisable with respect to 2.0849% of the Shares, provided that,
except as specifically provided in the next sentence, the Option shall vest with
respect to such an increment only if Eligible Participant is employed with the
Company on the specified date for such increment.
Notwithstanding the provisions of Section 2 above, in the event of an
Initial Public Offering (as defined below), the Option shall continue to vest
and become exercisable pursuant to the monthly schedule set forth above;
provided, however, if Eligible Participant is employed with the Company as of
the first anniversary of the Initial Public Offering, then all remaining
unvested Options shall automatically vest and become exercisable. For the
purposes of this Agreement, the term "Initial Public Offering" shall mean the
closing of an underwritten initial public offering of the Common Stock of the
Corporation.
Notwithstanding the provisions of Section 2, the Option shall vest and
become exercisable, to the extent not already vested and exercisable, upon a
Change in Control (as defined in Section 6 below). In the event of a Change in
Control, the Company shall send Eligible Participant prior written notice of the
effectiveness of such event and the last day on which Eligible Participant may
exercise the Option. Eligible Participant may, upon compliance with all of the
terms of this Award Agreement and the Plan, purchase any or all of the Shares
with respect to which the Option is vested and exercisable on or prior to the
last day specified in such notice and, to the extent the Option is not
exercised, it shall terminate at 5:00 p.m., eastern standard time, on the last
day specified in such notice.
In the event the Eligible Participant's employment with the Company is
terminated by the Company other than for Cause (as defined in the Employment
Agreement between the Company and the Eligible Participant dated March 1, 1999)
after the second anniversary of the Grant Date, that portion of the Option which
would have vested over the six month period following termination shall
automatically vest upon termination.
The schedule set forth above is cumulative, so that Shares as to which
the Option has become vested and exercisable on and after a date indicated by
the schedule may be purchased pursuant to exercise of the Option at any
subsequent date prior to termination of the Option.
3. Method of Exercise. The Option shall be exercised by written notice
directed to the Board, a form of which is attached hereto as Exhibit A and
incorporated herein by reference, accompanied by a check in payment of the price
specified in Section 1 above for the number of Shares specified, unless the
Board shall authorize an alternative form of payment. For the purposes of this
Section 3, payment also may be made by delivery of shares of Common Stock held
by the Eligible Participant and acceptable to the Board having an aggregate Fair
Market Value (as defined below) equal to the amount of cash that would otherwise
be required to pay the full option price, or by authorizing a third party to
sell a portion of the shares acquired upon exercise of the Option and remit to
the Corporation a sufficient portion of the sales proceeds to
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<PAGE> 3
pay the full option price. Payment also may be made by combining the above
methods. To the extent that shares are used in making a full or partial payment
of the option price, each such share will be valued at the Fair Market Value
thereof as of the date of exercise. Any overpayment will be promptly refunded,
and any underpayment will be deemed an exercise of such lesser whole number of
shares as the amount paid is sufficient to purchase.
As soon as practicable following receipt of such notice from the
Eligible Participant, the Board shall notify the Eligible Participant of any
payment or other allocation required under Section 4 below. Upon receipt of
notice from the Board that the Eligible Participant has paid the price specified
in Section 1 above and paid or made any allocation required under Section 4
below, the Company shall make immediate delivery of such Shares; provided,
however, that if any law or regulation requires the Company to take any action
with respect to the Shares specified in such notice before the issuance thereof,
then the date of delivery of such Shares shall be extended for the period
necessary to take such action.
The term "Fair Market Value" on any date will mean the last sale price
on such date of the shares of the Common Stock or, in case no such sale takes
place on such day, the average of the closing bid and asked prices of the shares
of the Common Stock, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange, or, if the shares of the Common Stock
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which
shares of the Common Stock are listed or admitted to trading or, if shares of
the Common Stock are not listed or admitted to trading on any national
securities exchange, the last quoted sale price, or if not so quoted, the
average of the high bid and low asked prices in the over-the-counter market, as
reported by the NASDAQ Stock Market or such other system then in use, or, if on
any such date shares of the Common Stock are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the shares of the Common Stock
selected by the Board of Directors. If shares of the Common Stock are not
publicly held or so listed or publicly traded, the "Fair Market Value" shall be
an amount determined in good faith by the Board of Directors as the fair market
value of a share of Common Stock which amount may be different from the fair
market value of shares of Common Stock used for purposes of stock option grants.
4. Payment to Satisfy Withholding Obligations. Notwithstanding any
other provision of this Award Agreement, any rights of the Eligible Participant
to exercise the Option shall be conditioned upon the Eligible Participant
forwarding to the Company, in addition to the per Share Purchase Price specified
in Section 1 above, cash payment of an amount equal to the amount the Company is
required by law or regulation of any governmental authority, whether federal,
state or local, domestic or foreign, to withhold in connection with such
exercise of the Option, if any, as determined by the Board in its discretion.
The amount of such payment shall be communicated to the Eligible Participant by
the Board as soon as practicable following the Board's receipt of the notice
specified in Section 3. In lieu of payment specified in this Section 4, the
Board may in its
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<PAGE> 4
discretion agree with the Eligible Participant to another means of satisfying
the Company's withholding obligation in connection with the exercise of the
Option.
5. Termination of Option. Except as otherwise stated herein, the Option
shall terminate and cease to be exercisable upon the first to occur of the
following:
(a) the date all Shares available for purchase under this
Award Agreement have been so purchased;
(b) upon the expiration of three (3) years following the
Eligible Participant's Termination of Employment for any reason including by
reason of death or Disability;
(c) at 5:00 P.M., eastern standard time, on the last date
specified in the notice described in Section 2 above in the event of a Change in
Control; or
(d) upon the expiration of the Exercise Period set forth in
Section 2 above.
6. Definitions.
(a) Purchase Price. The per Share purchase price under the
Option shall be the lesser of $5.00 or the per share conversion price of the
Company's Series C 7% Cumulative Convertible Preferred Stock as set forth in the
Company's Certificate of Designations, Preferences and Rights (the "Purchase
Price"); provided, however, that if the Company sells or otherwise transfers
shares of Stock (except pursuant to the exercise of any warrants, stock options
or other convertible securities outstanding on the Grant Date) prior to the
first anniversary of the Grant Date at a price lower than the Purchase Price,
the Purchase Price instead shall be the lowest price at which such shares of
Stock were sold.
(b) Change in Control. For purposes of this Agreement, the
term "Change in Control" shall be deemed to have occurred if:
(i) Tender Offer or Acquisition. Any
"person" as defined in section 3(a)(9) of the Securities Exchange Act of 1934
(the "Act"), including a "group" (as that term is used in sections 13(d)(3) and
14(d)(2) of the Act), but excluding the Company and any employee benefit plan
sponsored or maintained by the Company, including any trustee of such plan
acting as trustee, who:
(A) makes a tender or exchange
offer for any shares of the Company's stock pursuant to which at least fifty
percent (50%) of the Company's stock is purchased; or
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<PAGE> 5
(B) together with its "affiliates"
and "associates" (as those terms are defined in
Rule 12b-2 under the Act) becomes the "beneficial owner" (within the meaning of
Rule 13d-3 under the Act) of at least fifty percent (50%) of the Company's
stock; or
(ii) Merger or Consolidation. The happening
of any one (1) of the following events: (i) the dissolution or liquidation of
the Company; (ii) a reorganization, recapitalization, merger or consolidation
involving the Company, unless (A) the transaction involves only the Company and
one or more of the Company's parent corporation and wholly-owned (excluding
interests held by employees, officers and directors) subsidiaries; or (B) the
shareholders who had the power to elect a majority of the board of directors of
the Company immediately prior to the transaction have the power to elect a
majority of the board of directors of the surviving entity immediately following
the transaction; (iii) the sale of all or substantially all of the assets of the
Company to another company, person or business entity; or (iv) an acquisition of
Company stock, unless the shareholders who had the power to elect a majority of
the board of directors of the Company immediately prior to the acquisition have
the power to elect a majority of the board of directors of the Company
immediately following the transaction.
7. Rights Prior to Exercise of Option. The Eligible Participant shall
have no rights as a stockholder with respect to the Shares except to the extent
he has exercised the Option, paid the price specified in Section 1 and received
delivery of such Shares as herein provided.
8. Non-Transferable. During the Eligible Participant's lifetime, this
Option shall be exercisable only by him and neither it nor any right thereunder
shall be transferable except by will or laws of descent and distribution (and
shall be exercisable by such transferee only as provided in Sections 2 and 5
above), or be subject to attachment, execution or other similar process. In the
event of any attempt by the Eligible Participant to alienate, assign, pledge,
hypothecate or otherwise dispose of the Option or any right hereunder, except as
provided for herein, or in the event of the levy of any attachment, execution or
similar process upon the rights or interest hereby conferred, the Board may
terminate the Option by notice to the Eligible Participant, and the Option shall
thereupon become null and void.
9. Covenants and Representations of Eligible Participant. The Eligible
Participant represents, warrants, covenants and agrees with the Company as
follows:
(a) The Option is being received for the Eligible
Participant's own account, and not for the account of any other person, with the
intent of holding the Option and the Shares issuable pursuant thereto for
investment and not with the intent of participating, directly or indirectly, in
a distribution or resale of the Shares or any portion thereof.
(b) The Eligible Participant is not acquiring the Option or
any Shares based upon any representation, oral or written, by any person with
respect to the future value of, or income from, the Shares, but rather upon
independent examination and judgment as to the prospects of the Company.
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<PAGE> 6
(c) The Eligible Participant has had the opportunity to ask
questions of and receive answers from the Company and its executive officers and
to obtain all information necessary for the Eligible Participant to make an
informed decision with respect to the investment in the Company represented by
the Option and any Shares issued upon its exercise.
(d) The Eligible Participant is able to bear the economic risk
of any investment in the Shares, including the risk of a complete loss of the
investment, and the Eligible Participant acknowledges that he or she must
continue to bear the economic risk of any investment in Shares received upon
exercise of the Option for an indefinite period.
(e) The Eligible Participant understands and agrees that the
Shares subject to the Option may be issued and sold to the Eligible Participant
without registration under any state or federal laws relating to the
registration of securities, and the Shares will be issued and sold in reliance
upon exemptions from registration under appropriate state and federal laws based
in part upon the representations of the Eligible Participant made herein.
(f) Shares issued to the Eligible Participant upon exercise of
the Option will not be offered for sale, sold or transferred by the Eligible
Participant other than pursuant to: (1) an effective registration under
applicable state securities laws or in a transaction which is otherwise in
compliance with those laws; (2) an effective registration under the Securities
Act of 1933 or in a transaction otherwise in compliance with such Act; and (3)
evidence satisfactory to the Company of compliance with all applicable state and
federal securities laws. The Company shall be entitled to rely upon an opinion
of counsel satisfactory to it with respect to compliance with the foregoing
laws.
(g) A legend in substantially the following form, indicating
that the Shares issued pursuant to the Option have not been registered under any
federal or state securities laws, may be placed on the certificate or
certificates delivered to the Eligible Participant, and any transfer agent of
the Company may be instructed to require compliance with all legends on such
certificates:
The securities represented hereby have not been registered under the
Securities Act of 1933, or the securities laws of any state. The
securities represented hereby may no be resold unless registered under
the Securities Act of 1933 and any applicable state securities laws
unless an exemption from registration exists.
In addition, the shares of Stock issued to the Eligible Participant
will be subject to the terms of certain Securityholders' Agreements dated
November 2, 1995 and November 13, 1996 and the certificate or certificates
delivered to the Eligible Participant shall include a legend in substantially
the following form:
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<PAGE> 7
The shares represented by this certificate are subject to certain
Securityholders' Agreements dated as of November 2, 1995 and November
13, 1996 by and between Park `N View, Inc., a Delaware corporation, and
its shareholders restricting the free transferability of said shares.
Copies of such Securityholders' Agreements are on file in the office of
the Secretary of the Company.
(h) The Eligible Participant has not relied upon the Board,
the Company, or an employee or agent of the Company with respect to any tax
consequences related to the grant or exercise of this Option, or the disposition
of Shares purchased pursuant to exercise of the Option. The Eligible Participant
acknowledges that, as a result of the grant and/or exercise of the Option, the
Eligible Participant may incur a substantial tax liability. The Eligible
Participant assumes full responsibility for all such consequences and the filing
of all tax returns and elections the Eligible Participant may be required to or
find desirable to file in connection therewith. In the event any valuation of
the Option or Shares purchased pursuant to its exercise must be made under
federal or state tax laws and such valuation affects any return or election of
the Company, the Eligible Participant agrees that the Company may determine such
value and that the Eligible Participant will observe any determination so made
by the Company in all returns and elections filed by the Eligible Participant.
(i) The agreements, representations, warranties and covenants
made by the Eligible Participant herein with respect to the Option shall also
extend to and apply to all of the Shares issued to the Eligible Participant from
time to time pursuant to exercise of the Option. Acceptance by the Eligible
Participant of any certificate representing Shares shall constitute a
confirmation by the Eligible Participant that all such agreements,
representations, warranties and covenants made herein shall be true and correct
at such time.
10. Sale or Other Disposition by Majority Interest. The Eligible
Participant hereby irrevocably appoints the Company and its President, or either
of them, as the Eligible Participant's agents and attorneys-in-fact, with full
power of substitution for and in the Eligible Participant's name, to sell,
exchange, transfer or otherwise dispose of all or a portion of the Shares and to
do any and all things and to execute any and all documents and instruments
(including, without limitation, any stock transfer powers) in connection
therewith, such powers of attorney not to become operable until such time as the
holder or holders of a majority of the issued and outstanding shares of Stock
sell, exchange, transfer or otherwise dispose of, or contract to sell, exchange,
transfer or otherwise dispose of, all or a majority of the issued and
outstanding shares of Stock. Any sale, exchange, transfer or other disposition
of all or a portion of Shares pursuant to the foregoing powers of attorney shall
be made upon substantially the same terms and conditions (including sale price
per share) applicable to a sale, exchange, transfer or other disposition of
shares of Stock owned by the holder or holders of a majority of the issued and
outstanding shares of Stock. For purposes of determining the sale price per
share of the Shares under this Section 10, there shall be excluded the
consideration (if any) paid or payable to the holder or holders of a majority of
the issued and outstanding shares of Stock in connection with any employment,
consulting, noncompetition or similar agreements which such holder or holders
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<PAGE> 8
may enter into in connection with or subsequent to such sale, transfer, exchange
or other disposition. The foregoing power of attorney shall not impose or be
deemed to impose any fiduciary duty or any other duty (except as set forth in
this Section 10) or obligation on either the Company or its President, shall be
irrevocable and coupled with an interest and shall not terminate by operation of
law, whether by the death, bankruptcy or adjudication of incompetency or
insanity of the Eligible Participant or the occurrence of any other event.
11. Binding Effect. This Award Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
12. Gender and Number. All terms used in this Award Agreement shall be
deemed to refer to the masculine, feminine, neuter, singular or plural as the
context may require.
13. Terms and Conditions of Plan. The terms and conditions included in
the Plan are incorporated by reference herein, and to the extent that any
conflict may exist between any term or provision of this Award Agreement and any
term or provision of the Plan as in effect from time to time, such term or
provision of the Plan shall control.
14. Entire Agreement. This Award Agreement (including the Plan which is
incorporated herein by reference) sets forth all of the promises, agreements,
conditions, understandings, warranties and representations between the parties
hereto with respect to the Option and the Shares, and there are no promises,
agreements, conditions, understandings, warranties or representations, oral or
written, express or implied, between them with respect to the Option or the
Shares other than as set forth therein or herein. This Award Agreement
supersedes and replaces any and all prior agreements between the parties hereto
with respect to the Option or the Shares. Except as set forth in the Plan, this
Award Agreement is, and is intended by the parties to be, an integration of any
and all prior agreements or understandings, oral or written, with respect to the
Option and the Shares.
15. Invalid or Unenforceable Provision. The invalidity or
unenforceability of any particular provision of this Award Agreement shall not
affect the other provisions hereof, and this Award Agreement shall be construed
in all respects as if such invalid or unenforceable provision were omitted.
16. Governing Law. This Award Agreement shall be construed and enforced
in accordance with the laws of Delaware, without reference to its conflicts of
laws rules or the principles of the choice of law.
17. Miscellaneous.
(a) Neither the granting of this Option, the exercise thereof
nor any other provision of this Award Agreement shall be construed as conferring
upon the Eligible Participant
8
<PAGE> 9
any right to be employed or continue to be employed by the Company or any of its
subsidiaries or to otherwise continue in the service of such corporations, or as
interfering with or restricting in any way the right of such corporations to
terminate their relationship with the Eligible Participant at any time.
(b) The Company, the Board and any employees or agents thereof
are relieved from any liability for the non-issuance or non-transfer, or any
delay in the issuance or transfer, of any of the Shares which results from the
inability of the Company to obtain, or in any delay in obtaining, from each
regulatory body having jurisdiction all requisite authority to issue or transfer
the Stock of the Company in satisfaction of this Option if counsel for the
Company deems such authorization necessary for the lawful issuance or transfer
of any such Shares.
(c) No Stock acquired by exercise of this Option shall be sold
or otherwise disposed of in violation of any federal or state securities law or
regulation. Stock certificates evidencing the shares issuable upon exercise of
this Option may contain a legend regarding resale limitations, including the
requirement that the Eligible Participant deliver an opinion of counsel to the
Company.
(d) This Option shall be exercised in accordance with the
terms of the Plan and such administrative regulations as the Board may from time
to time adopt. All acts, determinations and decisions of the Board with respect
to the interpretation, construction and application of the Plan and/or this
Award Agreement shall be conclusive and binding upon the Eligible Participant
and all other persons.
(e) The Board shall, with the consent of the Eligible
Participant, be entitled to amend this Award Agreement at any time provided that
the Award Agreement, as amended, is consistent with the provisions of the Plan.
18. Acknowledgment. Eligible Participant accepts this Option in full
satisfaction of the Company's obligations to grant stock options to Eligible
Participant pursuant to the Employment Agreement between the Company and
Eligible Participant dated March 1, 1999.
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Award Agreement
to be executed as of the day and year first above written.
PARK 'N VIEW, INC.
By: /s/ Ian Williams
------------------------
Ian Williams
ELIGIBLE PARTICIPANT
/s/ Robert P. May
---------------------------
Robert P. May
10
<PAGE> 11
EXHIBIT A
Park `N View, Inc.
11711 NW 39th Street
Coral Springs, Florida 33065
Attention: Board of Directors
Re: Exercise of Nonqualified Stock Option
Dear Board Members:
Pursuant to the terms and conditions of the Nonqualified Stock Option
Award Agreement dated as of _________________, 19__ (the "Award Agreement")
between _____________________________ and Park `N View, Inc. (the "Company"), I
hereby agree to purchase _______ shares of the Stock of the Company and tender
payment in full for such shares in accordance with the terms of the Award
Agreement. I hereby consent to being a party to the Securityholders' Agreements
as is required by the Award Agreement.
I hereby reaffirm that the representations and warranties made in the
Award Agreement are true and correct on the date hereof as if made on the date
hereof.
Very truly yours,
-------------------------------
Print Name:
--------------------
Date:
-----------------------
11
<PAGE> 1
EXHIBIT 10.4
JOINDER TO STOCK PURCHASE AGREEMENT
AND RELATED DOCUMENTS
Reference is made to the Stock Purchase Agreement, dated as of August
22, 1997, by and among Park `N View, Inc., a Delaware corporation (the
"Company"), and the "Purchasers" identified therein (the "Stock Purchase
Agreement").
The undersigned has agreed to purchase 23,000 shares of the Company's
Series C Cumulative Convertible Preferred Stock (the "Shares") at a price of
Eight Dollars ($8.00) per share. In connection with the purchase of such Shares,
the undersigned hereby agrees to become: (a) a party to the Stock Purchase
Agreement, as a "Purchaser" and to be bound by all the terms and conditions
thereof; (b) a party to the Amendment to Registration Rights Agreement, dated as
of August 22, 1997, by and among the Company and the "Investors" as identified
therein, as one of the "Series C Holders" as identified therein and to be bound
by all the terms and conditions thereof; (c) a party to the Amendment to
Securities Restriction Agreement, dated as of August 22, 1997 by and among the
Company and the "Securityholders" as identified therein, as one of the "Series C
Holders" as identified therein and to be bound by all the terms and conditions
thereof, (d) a party to the Amendment to Amended and Restated Securityholders'
Agreement and Exchange Agreement, dated as of August 22, 1997 by and among the
Company and the "Investors" as identified therein, as one of the "Series C
Holders" as identified therein and to be bound by all the terms and conditions
thereof, and (e) the Investor Questionnaire as a "Purchaser" as identified
therein. The undersigned's name will be added to Exhibit A to the Stock Purchase
Agreement and to Exhibit C to the Amendment to Amended and Restated
Securityholders' Agreement and Exchange Agreement.
Notwithstanding any term or condition of the Stock Purchase Agreement
or any other agreement referenced herein to the contrary, the undersigned
acknowledges and agrees that the Company's representations and warranties in the
Stock Purchase Agreement and each other agreement referenced herein were made as
of the date of the Stock Purchase Agreement and have not been updated as of the
date hereof. The undersigned acknowledges and agrees that the Company has not
made any representations and/or warranties to the undersigned in connection with
the sale of the Shares to the undersigned. The undersigned hereby waives any
claim that the undersigned and/or his successors or assigns may have as a result
of the inaccuracy or incompletion of any of the representations or warranties
made by the Company in the Stock Purchase Agreement or any other agreement
referenced herein.
/s/ Robert P. May
-----------------------------
Robert May
Effective March 1, 1999
<PAGE> 1
EXHIBIT 10.5
PARK `N VIEW, INC.
11711 N.W. 39th Street
Coral Springs, Florida 33065
March 3, 1999
Mr. Bob May
11711 N.W. 39th Street
Coral Springs, Florida 33065
Re: Matters Related to Options Granted by Park `N View, Inc.
Dear Bob:
In connection with your employment by Park `N View, Inc. (the
"Company"), the Company granted to you, effective as of March 3, 1999, options
to purchase up to 567,038 shares of the Company's Common Stock. This letter
clarifies certain circumstances under which the Company will grant to you
options to purchase additional shares of the Company's Common Stock.
In the event of an Equity Financing (as defined below) (or a series of
Equity Financings) by the Company in an aggregate amount up to $20,000,000
closed at any time after March 1, 1999, but on or before February 29, 2000, the
Company will grant to you additional options to purchase shares of the Company's
Common Stock such that, immediately following any such grant of additional
options to you, you will hold options to purchase an aggregate of up to five
percent (5%) of the Post-Financing Common Stock (including those previously
issued to you). For the purposes of this letter, the term "Post-Financing Common
Stock" will mean (i) the sum of (A) the issued and outstanding Common Stock of
the Company on a fully diluted basis, as of the date of this letter, plus (B)
the number of shares of Common Stock issued (on an as-exercised, as converted
basis) in the Equity Financing(s), less (ii) any securities issued or issuable
pursuant to any adjustment to the number of shares issuable upon conversion of
the Company's securities pursuant to the terms of such securities at any time
after the date of this letter.
For the purposes of this letter, the term "Equity Financing" will mean
any sale of Common Stock (other than "Permitted Stock" (as defined below)) or
Common Stock warrants, rights or other securities convertible into Common Stock
in return for cash. For the purposes of this letter, the term "Permitted Stock"
will include (i) any grant of options to the Company's officers,
<PAGE> 2
directors, employees and/or consultants to purchase shares of the Company's
Common Stock, (ii) any grant to strategic partners (for example, TA, Pilot,
Petro or others) of warrants or other rights to purchase shares of the Company's
Common Stock, and (iii) any shares of Common Stock distributed in connection
with a stock dividend, stock split, recapitalization or other similar
transaction (which the terms of your option award agreement already cover).
Please sign below as indicated to acknowledge your agreement with the
terms outlined in this letter. If you have any questions or comments, please
call at your convenience.
Sincerely,
PARK `N VIEW, INC.
By: /s/ Ian Williams
------------------------
Ian Williams
ACKNOWLEDGED AND AGREED:
/s/ Robert P. May
- ------------------------
Bob May
2
<PAGE> 1
EXHIBIT 10.6
[*] - Confidential Treatment Requested Pursuant to Rule 24b-2
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. IT MAY
NOT BE SOLD OR OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT UNDER
SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO THE COMPANY
OR HOLDER'S COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED TO EFFECTUATE SUCH TRANSACTION OR UNLESS PURSUANT
TO RULE 144.
PARK `N VIEW, INC.
WARRANT
DATED MARCH 12, 1999
THIS CERTIFIES that [*] (the "Warrantholder"), for value received, is
entitled, upon the terms and subject to the conditions set forth herein, to
subscribe for and purchase up to 100,000 fully-paid and nonassessable shares
(the "Shares") of the Common Stock, par value $.01 per share (the "Stock"), of
Park `N View, Inc., a Delaware corporation (the "Company"), at the exercise
price of $9.20 per share (the "Initial Exercise Price"), which number of Shares
and Initial Exercise Price shall be adjusted pursuant to the provisions of
Section 10 hereof (the "Exercise Price").
1. Term. Except as otherwise provided for herein, the right to purchase
the Shares as granted herein shall become exercisable from time to time in
cumulative increments of 1,111 shares of Stock on the date on which [*] if
Warrantholder does not [*] and 1,121 shares of Stock on the date on which [*];
provided however that this Warrant shall become exercisable in full upon the
first to occur of the following: (i) 18 months following [*], (ii) the sale of
the Company, (iii) the consummation of a Qualifying Offering (as hereinafter
defined), (iv) the Company's [*] for any reason other than [*], or (v) the
Company's [*] or (vi) at such other time as the Company may request pursuant to
Section 3(g).
Except as otherwise provided, this Warrant shall terminate and cease to
be exercisable upon the first to occur of the following: (i) the Warrantholder's
purchase of all the Shares, (ii) [*], (iii) the Warrantholder's [*] for any
reason other than [*] or (iv) [*]. In addition, upon the occurrence of items
(iii) or (iv) above, the Company shall have the right to immediately repurchase
any Stock previously purchased by [*] pursuant to the Warrant at a price of
$9.20 per share (or at such other prices paid by [*] as adjusted pursuant to the
anti-dilution provisions of the Warrant). In addition to the foregoing, if
within four (4) years of the date of this Warrant: (i) the Warrantholder [*];
(ii) [*]; and (iii) [*] or [*], that increment of the Warrant [*] shall
immediately be null and void and (a) Warrantholder shall have no further right
to purchase any of such Shares
<PAGE> 2
hereunder; and (b) the Company shall have the right to immediately repurchase
any Shares [*] previously purchased by [*] pursuant to the Warrant at a price of
$9.20 per share (or at such other prices paid by [*] as adjusted pursuant to the
anti-dilution provisions of the Warrant). Any stock certificate issued to [*]
pursuant to its exercise of all or any part of the Warrant shall bear a legend
indicating that such Shares are subject to the Company's rights of repurchase
under the terms of this Warrant and the Company's rights shall survive the
termination of this Warrant or [*]. Notwithstanding the foregoing, the Company's
rights of repurchase under this Warrant shall terminate upon a Qualifying
Offering (defined below) or the sale of the Company.
2. Exercise of Purchase Rights.
Exercise. The purchase rights represented by this
Warrant are exercisable by the Warrantholder, in whole or in part, at any time,
or from time to time during the period set forth in Section 1 above, by
tendering the Company at its principal office a notice of exercise in the form
attached hereto as Exhibit A (the "Notice of Exercise"), duly completed and
executed. Upon receipt of the Notice of Exercise and the payment of the Exercise
Price in accordance with the terms set forth below, the Company shall issue to
the Warrantholder a certificate for the number of shares of Stock of the Company
purchased and shall execute the Notice of Exercise indicating the number of
shares of Stock which remain subject to future purchases, if any. The person or
persons in whose name(s) any certificate(s) representing shares of Stock shall
be issued upon exercise of this Warrant shall be deemed to have become the
holder(s) of the Shares represented thereby (and such shares shall be deemed to
have been issued) immediately prior to the close of business on the date or
dates upon which this Warrant is exercised. In the event of any exercise of the
rights represented by this Warrant, certificates for the Shares so purchased
shall be delivered to the Warrantholder or its designee as soon as practical and
in any event within thirty (30) days after receipt of such notice and, unless
this Warrant has been fully exercised or expired, a new Warrant representing the
remaining portion of the Shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be issued to the Warrantholder as
soon as possible and in any event within such thirty (30) day period.
Method of Exercise. The purchase rights hereby
represented may be exercised, at the election of the Warrantholder, by the
tender of the Notice of Election and the surrender of this Warrant at the
principal office of the Company and by the payment to the Company, by check,
cancellation of indebtedness or other form of payment acceptable to the Company,
of an amount equal to the then applicable Exercise Price per share multiplied by
the number of Shares then being purchased.
(c) Termination in the Event of Initial Public Offering.
Except as otherwise provided, this Warrant shall terminate immediately upon the
Company's consummation of a firm underwritten commitment public offering of the
Stock pursuant to an effective registration under the Securities Act of 1933, as
amended, covering the offer and sale of both primary and secondary shares of
Stock which results in gross proceeds of least $20,000,000, the Stock is quoted
or listed on either The Nasdaq Stock Market, the New York Stock Exchange or the
American Stock Exchange and the price at which the Stock is sold in such
offering is at least equal to the Exercise
2
<PAGE> 3
Price (a "Qualifying Offering"). The Company shall provide written notice of its
proposed filing of a registration statement relating to a Qualifying Offering at
least 30 days prior to such filing. The Warrantholder will be permitted to
rescind any previously tendered Notice of Election in the event that a proposed
public offering is not consummated for a per share price greater than the
Exercise Price.
3. Piggyback Registration Rights.
(a) If the Company, at any time proposes to register shares of Stock
under the Securities Act of 1933, as amended (the "Securities Act") (other than
pursuant to a registration on Form S-4 or Form S-8 or any similar or successor
forms), it shall at least 30 days prior to the filing of the Registration
Statement relating to such registration with the Securities and Exchange
Commission give written notice to the Warrantholder of the Company's intention
to do so, which notice shall include a statement as to the estimated maximum
number of Shares that the Warrantholder may include in such registration. Within
15 days after receipt of any such notice, the Warrantholder shall notify the
Company in writing whether the Warrantholder wishes to register any Shares in
such registration, which notification shall specify the number of Shares
intended to be sold or disposed of by the Warrantholder and shall state the
intended method of disposition of such Shares. If the Warrantholder fails to
submit such notice within such 15 day period, it shall be deemed to have
notified the Company that the Warrantholder does not then wish to register any
Shares. Upon receipt of such notice, the Company shall promptly use best efforts
to effect the registration under the Securities Act of the specified number of
Shares; provided that the Company need not promptly register any Shares if the
Warrantholder has failed to comply with paragraph (c) hereof in a timely manner.
(b) Prior to the effectiveness of a registration statement pursuant to
which any of the Shares are being registered, the Warrantholder must exercise
the Warrant for at least the number of Shares being registered.
(c) The Warrantholder will furnish to the Company in writing such
information as the Company may reasonably require from the Warrantholder, and
otherwise reasonably cooperate with the Company in connection with any
registration statement with respect to the Shares. The Company may exclude
Shares from registration to the extent that the Warrantholder fails to furnish
such information within a reasonable time after receiving such request.
(d) The Warrantholder may not participate in any underwritten
registration pursuant hereto unless the Warrantholder (a) agrees to sell Shares
on the basis provided in any underwriting arrangements approved by the Company
and (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents required by the terms
of such underwriting arrangements. The Warrantholder shall be entitled at any
time to withdraw Shares from such registration prior to its effective date in
the event that the Warrantholder shall disapprove of any of the terms of the
related underwriting agreement but only
3
<PAGE> 4
if the Warrantholder is permitted to do so by the managing underwriters or
pursuant to any agreement therewith.
(e) In the event that the proposed registration by the Company is, in
whole or in part, an underwritten public offering of the Stock, if the managing
underwriter determines that the inclusion of the Shares proposed to be included
would jeopardize the successful marketing of securities by the Company or
another selling securityholder, then the number of Shares to be included in such
underwritten public offering by the Warrantholder shall be reduced or
eliminated, the total amount of such reduction or elimination to be in the
discretion of the managing underwriter, provided that the number of shares of
stock to be included in any such registration for the account of selling
securityholders, other than those referenced in Section 3(h) hereof, shall be
reduced pro rata based on the number of shares of stock which each such selling
securityholder has requested to be included in such registration.
(f) The Warrantholder agrees to notify the Company as promptly as
practicable of any inaccuracy or change in information previously furnished by
such Warrantholder to the Company or of the occurrence of any event in either
case as a result of which any Prospectus included in a registration statement
pursuant to which Shares are registered contains or would contain an untrue
statement of a material fact regarding such Warrantholder or such
Warrantholder's intended method of distribution of Shares or omits to state any
material fact regarding such Warrantholder or such Warrantholder's intended
method of distribution of Shares necessary to make the statements therein, in
light of the circumstances then existing, not misleading, and promptly to
furnish to the Company any additional information required to correct and update
any previously furnished information or required so that such Prospectus shall
not contain, with respect to such Warrantholder or intended method of
distribution of Shares, an untrue statement of a material fact or omit to state
a material fact necessary to make the statements therein, in light of the
circumstances then existing, not misleading.
(g) If Company at any time proposes to register shares of Stock for
sale to the public in a firm commitment underwritten public offering and the
underwriter(s) thereof requires as a condition to such offering that the
Warrantholder exercise the Warrant prior to such offering, then the
Warrantholder agrees to exercise the Warrant if and to the extent the Warrant is
exercisable and the public offering price is at least equal to the Exercise
Price.
(h) Notwithstanding any provision hereof to the contrary, the
Warrantholder understands and acknowledges that there are in effect, and the
Warrantholder has been given the opportunity to review, agreements of the
Company pursuant to which the holders of the Company's preferred stock have
certain superior rights with respect to the Company's registration of their
offers and sales of the Stock under the Securities Act. The rights granted
hereunder to the Warrantholder are subordinate in all respects to the rights
granted under such prior agreements. Specifically, but without limitation, such
securityholders have priority over the Warrantholder with respect to inclusion
of securities in any registration statement of the Company with the result that,
among other things, the securities of such securityholders shall be
4
<PAGE> 5
included in a registration statement filed by the Company prior to any inclusion
in such registration statement by the Warrantholder.
(i) In the event of any underwritten offering of securities by the
Company or other securityholders of the Stock, the Warrantholder agrees that it
will not sell any shares of Stock, regardless of whether the Warrantholder is a
selling securityholder in such offering, during the period commencing 10 days
prior to any such underwritten offering and ending 90 days following such
underwritten offering.
(j) The Company shall not be obligated to include any Shares in a
registration pursuant hereto, if at the time of the receipt of a request to
include such Shares, the Shares could be sold by the Warrantholder pursuant to
Rule 144 under the Securities Act (or any similar or successor rule in effect at
that time), provided that, the Company shall, at its expense, promptly provide,
to or on behalf of Warrantholder, such opinions of counsel and other
documentation as may be required in connection with all sales by Warrantholder
of the Shares pursuant to Rule 144 under the Securities Act (or any similar or
successor rule in effect at that time).
(k) The Company will take all such actions as may be reasonably
necessary to assure that the Shares issuable pursuant to this Warrant, upon
issuance, shall have been approved for listing upon any domestic stock exchange
upon which the Stock is then listed.
(l) The costs and expenses incurred in connection with the registration
of the Shares hereunder will be paid by the Company; provided, however, that the
Company will not bear the cost of nor pay for any (i) stock transfer taxes
imposed in respect of the transfer of any Shares, (ii) any underwriting
discounts or commission or similar fees related to an underwritten offering of
the Shares or (iii) any fees and disbursements of counsel representing the
Warrantholder.
5
<PAGE> 6
4. Reservation of Shares.
(a) Authorization and Reservation of Shares. The Company will
at all times have authorized and reserved a sufficient number of Shares to
provide for the exercise of the rights to purchase Stock as provided herein. All
such shares of Common Stock will be duly authorized and, when issued upon
exercise of this Warrant in accordance with the terms hereof, shall be validly
issued, fully paid and nonassessable with no liability on the part of the
holders thereof. The Company shall not at any time while this Warrant remains
outstanding allow the par value of its Common Stock to exceed the then effective
Exercise Price.
(b) Registration or Listing. If any shares of Stock required
to be reserved for purposes of exercise of this Warrant require registration
with or approval of any governmental authority under any Federal or State law
(other than any registration under the Securities Act of 1933, as then in
effect, or any similar Federal statute then enforced, or any state securities
law, required by reason of any transfer), or listing on any domestic securities
exchange, or if at the time of exercise the class of Stock into which this
Warrant is then exercisable is listed on any domestic securities exchange, the
Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered, listed or approved for
listing on such domestic securities exchange, as the case may be.
5. Representations and Warranties of the Company. The Company hereby
represents and warrants to the Warrantholder that, as of the date hereof:
(a) Organization and Capitalization. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The authorized capital stock of the Company consists
of 17,750,000 shares of capital stock, comprised of 12,000,000 shares of Common
Stock, of which 4,318,182 shares of Common Stock are issued and outstanding and
5,750,000 shares of Preferred Stock, of which (i) 627,630 shares are designated
as Series A Preferred Stock, of which 388,065 shares are issued and outstanding,
(ii) 1,372,370 shares are designated as Series B Preferred Stock, of which
1,372,370 shares are issued and outstanding, and (iii) 3,750,000 shares are
designated as Series C Preferred Stock, of which 2,351,543 shares are issued and
outstanding. There are reserved for issuance: (i) 1,875,000 shares of Common
Stock which may be issued upon conversion of Series B Preferred Stock; (ii)
2,351,543 shares of Common Stock which may be issued upon conversion of Series C
Preferred Stock; (iii) 1,496,363 shares of Common Stock which may be issued
pursuant to the exercise of options previously granted to present employees of
the Company; (iv) 437,803 shares of Common Stock which are available for future
grants of options under the Company's Stock Option Plan; and (v) up to 785,774
shares of Common Stock which may be issued pursuant to the exercise of
outstanding warrants (excluding this Warrant). Except as set forth above, the
Company has not issued or agreed to issue any stock purchase rights or
securities convertible into Common Stock. All the issued and outstanding shares
of the Company's capital stock have been validly issued without violation of any
preemptive or similar rights and are fully paid and nonassessable.
6
<PAGE> 7
(b) Authority. The Company has full corporate power and
authority to execute and deliver this Warrant and to perform all of its
obligations hereunder, and the execution, delivery and performance hereof have
been duly authorized by all necessary corporate action on its part. This Warrant
has been duly executed on behalf of the Company and constitutes the legal, valid
and binding obligation of the Company enforceable in accordance with its terms.
(c) No Legal Bar. Except to the extent that any of the rights,
conflicts or requirements described in this paragraph may have been previously
waived or complied with, neither the execution, delivery or performance of this
Warrant will not (i) conflict with or result in a violation of the Company's
Certificate of Incorporation, as amended, or the Company's Bylaws, as amended,
(ii) conflict with or result in a violation of any law, statute, regulation,
order or decree applicable to the Company, (iii) require any consent or
authorization or filing with, or other act by or in respect of, any governmental
authority (other than compliance with federal and state securities requirements,
which requirements shall be complied with by the Company within the prescribed
periods), conflict with or result in a breach of, constitute a default under or
constitute an event creating rights of acceleration, termination or cancellation
under any mortgage, lease, contract, franchise, instrument or other agreement to
which the Company is a party or by which it is bound.
(d) Validity of Shares. When issued upon the exercise of this
Warrant as contemplated herein, shares of Common Stock will have been validly
issued and will be fully paid and nonassessable.
(e) Notice of Cash Dividends. The Company shall provide
Warrantholder with notice of the declaration of a cash dividend at least 15 days
prior to the record date for the payment of such dividend and shall provide
Warrantholder with such information as may be reasonably requested by
Warrantholder to allow Warrantholder to make a decision as to whether to
exercise all or some portion of this Warrant.
6. Covenants of the Company.
(a) No Breach or Amendment. The Company shall not by any
action, including, without limitation, amending its Certificate of
Incorporation, as amended, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant; the Company will at all times in good faith
assist in the carrying out of all such terms and in the taking of all such
reasonable action as may be necessary or appropriate to protect the rights of
the Warrantholder against breach; provided, however, that nothing in this
Section 6(a) will restrict the Company's ability to enter into agreements for
the incurrence of indebtedness with financial or other institutional investors
in the ordinary course of business. Without limiting the generality of the
foregoing, the Company will (i) not increase the par value of any shares of
Common Stock issuable upon the exercise of this Warrant above the amount payable
therefor upon such exercise, (ii) take all such action as may be necessary or
appropriate in order that the Company may validly issue fully paid and
nonassessable shares of Common Stock upon the exercise of this Warrant, and
(iii) obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to
7
<PAGE> 8
perform its obligations under this Warrant. Upon the request of the
Warrantholder, the Company will at any time during the period this Warrant is
outstanding acknowledge in writing, in a form reasonably satisfactory to the
Warrantholder, the continued validity of this Warrant and the Company's
obligations hereunder.
(b) Availability of Information. The Company will cooperate
with the Warrantholder in supplying such information as may be reasonably
necessary for the Warrantholder to complete and file any information reporting
forms presently or hereafter required by the Securities and Exchange Commission
as a condition to the availability of an exemption from the Securities Act of
1933, as amended, for the sale of this Warrant or any shares issued pursuant to
this Warrant. So long as this Warrant is outstanding, the Company will provide
the Warrantholder as soon as reasonably practicable but in any event (i) within
120 days after the close of each fiscal year of the Company, audited financial
statements as of the end of such fiscal year; and (ii) within 60 days after the
close of each of the Company's first 3 fiscal quarters, an unaudited balance
sheet of the Company as of the end of such fiscal quarter and unaudited
statements of operations and cash flows of the Company for the quarter just
ended and for the portion of the fiscal year ended with the end of such quarter.
In addition, simultaneous with the distribution to its stockholders, the Company
will provide the Warrantholder with all notices to stockholders or other
communications sent by or on behalf of the Company to such stockholders.
(c) Certain Expenses. The Company will pay all expenses in
connection with, and all taxes (other than stock transfer, income and capital
gain taxes) and other governmental charges that may be imposed in respect of the
issuance and delivery of this Warrant or any shares issued or issuable pursuant
to this Warrant.
7. No Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of the Warrantholder's
rights to purchase Stock, but in lieu of such fractional shares the Company
shall make a cash payment therefor upon the basis of the fair market value of a
share of that stock at the time of exercise.
8. No Rights as Shareholder. This Warrant does not entitle the
Warrantholder to any voting rights or other rights as a shareholder of the
Company prior to the exercise of the Warrantholder's rights to purchase Stock as
provided for herein.
9. Warrantholder Registry. The Company shall maintain a registry
showing the name and address of the registered holder of this Warrant.
10. Adjustment Rights. The Exercise Price and the number of Shares of
Stock purchasable hereunder are subject to adjustment from time to time, as
follows:
(a) Reclassification or Merger. In case of any
reclassification, change or conversion of securities of the class issuable upon
exercise of this Warrant into the same or a different number of securities of
any other class or classes, or in case of any merger of the
8
<PAGE> 9
Company with or into another corporation (other than a merger with another
corporation in which the Company is the acquiring and the surviving corporation
and which does not result in any reclassification or change of outstanding
securities issuable upon exercise of this Warrant), or in case of any sale of
all or substantially all of the assets of the Company, the Company, or such
successor or purchasing corporation, as the case may be, shall duly execute and
deliver to the holder of this Warrant, so that the holder of this Warrant shall
have the right to receive, at a total purchase price not to exceed that payable
upon the exercise of the unexercised portion of this Warrant, and in lieu of the
Shares of Stock theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change or merger by a holder of the number of Shares of
Stock then purchasable under this Warrant. Such new Warrant shall provide for
adjustment that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 10. The provisions of this subparagraph
(a) shall similarly apply to successive reclassifications, changes, mergers and
transfers.
(b) Subdivision or Combination of Shares. If the Company at
any time shall subdivide its Stock, the Exercise Price shall be proportionately
decreased and the number of Shares issuable pursuant to this Warrant shall be
proportionately increased. If the Company at any time shall combine its Stock,
the Exercise Price shall be proportionately increased and the number of Shares
issuable pursuant to this Warrant shall be proportionately decreased.
(c) Stock Dividends. If the Company at any time shall pay a
dividend payable in, or make any other distribution (except any distribution
specifically provided for in the foregoing subsections (a) or (b)) of Stock, or
issue shares of Common Stock at a price less than the Exercise Price (other than
shares of Common Stock issuable: (i) under the Park `N View Stock Option Plan as
in effect on the date hereof and as disclosed in Section 5(a) above; (ii) upon
conversion of any outstanding preferred stock as disclosed in Section 5(a)
above; or (iii) upon exercise of any warrants outstanding as disclosed in
Section 5(a) above), then the Exercise Price shall be adjusted, from and after
the date of determination of stockholders entitled to receive such dividend or
distribution or the date of such issuance to that price determined by
multiplying the Exercise price in effect immediately prior to such date of
determination by a fraction (i) the numerator of which shall be the total number
of shares of Stock outstanding immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number of
shares of Stock outstanding immediately after such dividend, distribution or
issuance. The Warrantholder shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of Shares of Stock
(calculated to the nearest whole share) obtained by multiplying (i) the Exercise
Price in effect immediately prior to such adjustment by (ii) the number of
Shares of Stock issuable upon the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting from
such adjustment.
(d) Reserved Shares Adjustment. The number of shares reserved
for issuance pursuant to this Warrant shall automatically be adjusted without
further action by the Company in the event of any adjustment of the number of
Shares issuable pursuant to this Warrant. In case of
9
<PAGE> 10
any event resulting in adjustment pursuant to Section 10(a), 10(b) or 10(c)
above, the Company shall give written notice thereof to the Warrantholder
stating the date on which such event is to take place (which shall be at least
forty-five (45) days after the Warrantholder's receipt of such notice).
11. Compliance with Securities Act; Disposition of Warrant or Shares of
Stock.
(a) Compliance with Securities Act. The Warrantholder, by
acceptance hereof, agrees that this Warrant, and the Shares of Stock to be
issued upon exercise hereof, are being acquired for investment and that such
Warrantholder will not offer, sell or otherwise dispose of this Warrant, or any
Shares of Stock to be issued upon exercise hereof except under circumstances
which will not result in a violation of the Securities Act of 1933, as amended
(the "Securities Act"), or any applicable state securities laws. At the time of
exercise, the Warrantholder shall execute an Investment Letter in the form
attached hereto as Exhibit B stating (among other things) that the shares issued
pursuant to the Warrant have not been registered under federal or state
securities laws, and that such shares may not be transferred unless the shares
are so registered or unless the Company has received an opinion of the Company's
counsel or such holder's counsel reasonably acceptable to the Company that such
transfers are exempt from registration.
(b) Legend. This Warrant and all shares of Stock issued upon
exercise of this Warrant (unless registered under the Securities Act and any
applicable state securities laws) shall be stamped or imprinted with a legend in
substantially the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD OR
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO UNDER SAID ACT OR UNLESS THE COMPANY
HAS RECEIVED AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS
NOT REQUIRED TO EFFECTUATE SUCH TRANSACTION OR UNLESS PURSUANT
TO RULE 144."
(c) Representations and Warranties of Warrantholder. In
addition, in connection with the issuance of this Warrant, the Warrantholder
specifically represents to the Company by acceptance of this Warrant as follows:
The Warrantholder is aware of the Company's
business affairs and financial condition, and has acquired information about the
Company sufficient to reach an informed and knowledgeable decision to acquire
this Warrant. The Warrantholder is acquiring this Warrant for its own account
for investment purposes only and not with a view to, or for the resale in
connection with, any "distribution" thereof in violation of the Securities Act.
10
<PAGE> 11
The Warrantholder understands that this
Warrant has not been registered under the Securities Act in reliance upon a
specific exemption therefrom, which exemption depends upon, among other things,
the bona fide nature of the Warrantholder's investment intent as expressed
herein.
The Warrantholder further understands
that this Warrant and any shares of Stock to be issued upon exercise hereof must
be held indefinitely unless subsequently registered under the Securities Act and
qualified under any applicable state securities laws, or unless exemptions from
registration and qualification are otherwise available.
(d) Disposition of Warrant or Shares. Subject to the terms and
conditions of Section 11(e), with respect to any offer, sale or other
disposition of this Warrant or any Shares of Stock acquired pursuant to the
exercise of this Warrant prior to registration of such Warrant or Shares, the
holder agrees to give written notice to the Company prior thereto, describing
briefly the manner thereof, together with an opinion of the Company's counsel or
such holder's counsel reasonably satisfactory to the Company, or other evidence,
if reasonably requested by the Company, to the effect that such offer, sale or
other disposition may be effected without registration or qualification (under
the Securities Act as then in effect or any federal or state securities law then
in effect) of this Warrant or such shares of Stock and indicating whether or not
under the Securities Act certificates for this Warrant or such shares of Stock
to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to ensure compliance with
such law. Promptly upon receiving such written notice and reasonably
satisfactory opinion or other evidence, if so requested, the Company, as
promptly as practicable but no later than five (5) days after receipt of the
written notice, shall notify such holder that such holder may sell or otherwise
dispose of this Warrant or such shares of Stock, all in accordance with the
terms of the notice delivered to the Company. Notwithstanding the foregoing,
this Warrant or such shares of Stock may, as to such federal laws, be offered,
sold or otherwise disposed of in accordance with Rule 144 or 144A under the
Securities act, provided that the Company shall have been furnished with such
information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 or 144A have been satisfied. Each
certificate representing this Warrant or the shares of Stock thus transferred
(except a transfer pursuant to Rule 144 or 144A) shall bear a legend as to the
applicable restrictions on transferability in order to ensure compliance with
such laws, unless in the aforesaid opinion of counsel for the Company or the
Warrantholder or pursuant to Rule 144 or 144A, such legend is not required in
order to ensure compliance with such laws. The Company may issue stop transfer
instruction to its transfer agent in connection with such restrictions.
(e) Prohibition Against Transfer. This Warrant, the rights of
the Warrantholder hereunder and the Shares may not be assigned or transferred
except to a parent or subsidiary entity of the Warrantholder that, in the case
of a parent, owns at least 80% of the Warrantholder, and, in the case of a
subsidiary, is 80% owned by the Warrantholder; provided
11
<PAGE> 12
however that such transferee shall be bound by the terms and provisions hereof
and the prohibition on transfer of the Shares in this Section 11(e) shall
terminate upon the termination of all of the Company's rights to repurchase the
Shares pursuant to Section 1 hereof.
12. Miscellaneous.
(a) Attorney's Fees. In any litigation, arbitration or court
proceeding between the Company and the Warrantholder relating hereto, the
prevailing party shall be entitled to attorneys' fees and expenses and all costs
of proceedings incurred in enforcing this Warrant.
(b) Governing Law. This Warrant Agreement shall be governed by
and construed for all purposes under and in accordance with the laws of the
State of Delaware.
(c) Descriptive Headings. The descriptive headings of the
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
(d) Notices. Any notice required or permitted hereunder shall
be given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States mail, by registered or certified mail,
addressed (1) to the Warrantholder, at the address in the Warrant Register
maintained by the Company, and (ii) to the Company, at 11711 NW 39th Street,
Coral Springs, FL 33065, or at such other address as any such party may
subsequently designate by written notice to the other party.
(e) Lost Warrants. The Company covenants to the Warrantholder,
that upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant or any stock certificate
and, in the case of any such loss, theft or destruction, upon receipt of an
indemnity reasonably satisfactory to the Company, or in the case of any such
mutilation, upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
(f) Severability. In the event any one or more of the
provisions of this Warrant shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant shall be unimpaired, and
the invalid, illegal or unenforceable provision shall be replaced by a mutually
acceptable valid, legal and enforceable provision, which comes closest to the
intention of the parties underlying the invalid, illegal or unenforceable
provision.
(g) Modification and Waiver. This Warrant and any provision
hereof may be amended, waived, discharged or terminated only by an instrument in
writing signed by the party against whom enforcement of the same is sought.
(h) Application of Securityholders' Agreement. The
Warrantholder understands and acknowledges that there is in effect that certain
Amended and Restated
12
<PAGE> 13
SecurityHolders' and Exchange Agreement, as amended, (a copy of which has been
provided to the Warrantholder) and that the Shares and the Warrantholder shall
be subject to the terms and conditions thereof.
13
<PAGE> 14
(i) Survival of Representations and Warranties. All of the
Warrantholders representations, warranties, agreements and obligations with
respect to the ownership of the Shares shall survive the termination of the
Warrant.
(j) Entire Agreement.This Warrant constitutes the entire
agreement between the parties pertaining to the subject matter contained in it
and supersedes all prior and contemporaneous agreements, representations and
undertakings of the parties, whether oral or written, with respect to such
subject matter.
IN WITNESS WHEREOF, this warrant has been duly executed and delivered
by the undersigned.
PARK `N VIEW, INC.
By:/s/ Ian Williams
---------------------------------
Ian Williams, Chairman of the Board
14
<PAGE> 15
Exhibit A
NOTICE OF EXERCISE FOR CASH
To: Park `N View, Inc.
11711 NW 39th Street
Coral Springs, FL 33065
Attention: President
1. The undersigned, hereby elects to purchase ___ shares of
the Common Stock of Park `N View, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing
said shares in the name of the undersigned or in such other name or names as are
specified below:
Name Address
---- -------
Unless this Warrant has been fully exercised or expired, please issue a
new Warrant representing the remaining portion of the Shares, if any, with
respect to which this Warrant has not been exercised in the name of the
Warrantholders.
------------------------------
(SIGNATURE)
Date:
--------------------
15
<PAGE> 16
EXHIBIT B
FORM OF
INVESTMENT LETTER
___________, 19___
Park `N View, Inc.
11711 NW 39th Street
Coral Springs, FL 33065
Attention: President
Gentlemen:
The undersigned, ________________________ ("Purchaser") intends to
acquire up to _________ shares (the "Shares") of the Common Stock of Park `N
View, Inc. (the "Company") from the Company pursuant to the exercise of certain
Warrant held by Purchaser. The Shares will be issued to Purchaser in a
transaction not involving a public offering and pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "1933 Act"). In
connection with such purchase and in order to comply with the exemption from
registration relied upon by the Company, Purchaser represents, warrants and
agrees as follows:
1. Purchaser is acquiring the Shares for Purchaser's own account, to
hold for investment, and Purchaser shall not make any sale, transfer or other
disposition of the Shares in violation of the 1933 Act or the rules and
regulations promulgated thereunder by the Securities and Exchange Commission or
in violation of any applicable state securities law.
2. Purchaser has been advised that the issuance of the Shares is not
being registered under the 1933 Act on the ground that this transaction is
exempt from registration under Section 3(b) or 4(2) of the 1933 Act, as not
involving any public offering, and that reliance by the Company on such
exemptions is predicated in part on Purchaser's representations set forth in
this letter. Purchaser also has been advised that neither the Shares nor the
issuance thereof are being registered under the securities laws of any state.
3. Purchaser has been informed that the Shares must be held
indefinitely unless subsequently registered under the 1933 Act and applicable
state securities laws, or unless exemptions from such registration are available
with respect to any proposed transfer or disposition by Purchaser of the Shares.
Purchaser understands and agrees that the Company, as a condition to the
transfer of any of the Shares, may require that the request for transfer be
accompanied by an opinion of counsel satisfactory to the Company, in form and
substance satisfactory to the Company, to the effect that the proposed transfer
is exempt from registration
16
<PAGE> 17
under 1933 Act and applicable state securities laws, unless such transfer is
covered by an effective registration statement under the 1933 Act and all
applicable state securities laws.
4. Purchaser understands and agrees that there will be placed on the
certificates for the Shares, or any substitutions therefor, a legend stating in
substance:
The securities represented by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), nor under any
state securities law and may not be pledged, sold, assigned or
transferred unless (i) a registration statement with respect thereto is
effective under the Act and any applicable state securities laws or
(ii) in the opinion of counsel acceptable to the Company such
securities may be pledged, sold, assigned or transferred without an
effective registration statement under the Act or applicable state
securities laws.
5. Purchaser has been furnished with or has had access to the
information it has requested from the Company in connection with the investment
represented by the Shares and has had an opportunity to discuss with the
officers and management of the Company the Company's business and financial
affairs. Purchaser has such knowledge and experience in business and financial
matters and with respect to investments in securities or in privately held
companies so as to enable it to understand and evaluate the risks of such
investment and form an investment decision with respect thereto.
Very truly yours,
-----------------------------------
Name:
Accepted as of the day of 19
----- ------------------, ----.
PARK `N VIEW, INC.
By:
------------------------
Name:
Title:
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AT JUNE 30, 1998 AND MARCH 31, 1999 AND THE STATEMENTS OF OPERATIONS FOR
THE NINE MONTHS PERIOD ENDED MARCH 31, 1998 AND FOR THE NINE MONTHS PERIOD ENDED
MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 2,942,942
<SECURITIES> 27,964,371
<RECEIVABLES> 194,909
<ALLOWANCES> 10,000
<INVENTORY> 394,906
<CURRENT-ASSETS> 31,872,250
<PP&E> 37,157,947
<DEPRECIATION> 5,904,624
<TOTAL-ASSETS> 73,247,611
<CURRENT-LIABILITIES> 7,662,747
<BONDS> 70,732,831
41,452,522
0
<COMMON> 4,318
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 73,247,611
<SALES> 5,996,803
<TOTAL-REVENUES> 5,996,803
<CGS> 11,080,694
<TOTAL-COSTS> 11,080,694
<OTHER-EXPENSES> 13,779,231
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,529,617
<INCOME-PRETAX> (24,775,622)
<INCOME-TAX> 0
<INCOME-CONTINUING> (24,775,622)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24,775,622)
<EPS-PRIMARY> 6.230
<EPS-DILUTED> 6.230
</TABLE>
